TSP Talk Blog

Stocks tried to hold up on Friday but perhaps some nerves before the long holiday weekend triggered some selling just before the close. Trading volume was light, as we might expect, so the indices can get pushed around by some aggressive trading. The Dow ended the day down 54-points and most indices experienced some modest losses.

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The I-fund lagged as the dollar had a big day on Friday. Bond also declined.

Today there could be some holiday hangover as I don't expect volume to rise too sharply. It usually takes traders an extra day or two to come back to "normal" after a long holiday weekend.

The SPY (S&P500 / C-fund) pulled back slightly on Friday after hitting new intraday highs on Monday, Tuesday, and Wednesday of last week, and closing at a new high on Thursday. So far so good here as we watch the breakout from the cup and handle formation continue to play out, but they do tend to test the breakout level at some point.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk



The weekly chart shows the S&P 500 sitting basically in the middle of the long-term rising trading channel.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The Wilshire 4500 (S-fund) stalled at the end of last week with the other indices, but it could be that this is a bull flag forming. It's a little hard to say, but a test of the 20-day EMA before heading back up would not be the worst thing that could happen.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The Dow Transportation Index continues to struggle, and when this market leader is lagging it should be getting our attention. But with the broader indices surprisingly not be phased by this action despite weeks of clues, perhaps it is "different this time." It rarely is, but with the Fed playing a different game then any time in the past, perhaps it actually is different for stocks this time.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

The EFA (EAFE index / I-fund) is hanging around the recent highs but there are two open gaps below that may be an attraction. It may all depend on the dollar, which was very strong last week.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

We often talk about pre-holiday reversals and I'm a little suspicious of the rally in the dollar last week, only because the descending trend was prevalent up until the pre-holiday trading. After filling a gap left open in late April, the UUP opened two new gaps during last week's rally. It also closed above the 50-day EMA. Whether today's action is going to be considered part of the holiday action remains to be seen, but I see the dollar futures are up again in overnight trading Monday night.


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk

One more time on the Memorial Day performance chart: The day after the holiday (today) is historically a little weak but seasonality gets stronger as the week goes on.


Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk

The AGG (bonds / F-fund) was down of Friday but it did close well off the lows. This still looks bearish but the 200-day EMA has been holding and perhaps this pullback is trying to bottom?


Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk


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Thanks for reading! We'll see you back here tomorrow.

Tom Crowley


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