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Mixed July turns to seasonal problems in August

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Stocks opened higher on Friday, but by the close and after a bit of a rollercoaster ride, the bears won out and it seemed investors were content to take some profits heading into the historically underperforming month of August. A couple of economic reports before the open on Friday sent bonds and the dollar for a ride in opposite directions.

Daily TSP Funds Return

The I-fund led with the U.S. indices peaking while the European markets were closing, plus the dollar was down about 0.30%. It may be giving some of that back today. The small caps had a rough month, but closed strongly leading the stock funds during the last week of trading in July. Bonds had a solid day on Friday.

Here are the final numbers for July. Nice returns for the C and I funds, and even bonds rallied, but the small caps have been struggling and it could be a combination of interest rate hike concerns (small caps are impacted more than the large caps) and a possible slowdown in the economy where investors opt for quality over speculation.



China's Shanghai has been moving lower and could possibly test the the recent lows, but it has remained above the 200-day EMA. With earnings mostly out of the way, and the Greece situation seemingly in the rearview mirror, we may start seeing investors paying more attention to this worrisome situation in China.

For anyone interested, this article was posted in the Forum by one of our members and I thought it was a very interesting, and accurate depiction of what a trader or market timer goes through at different stages of their levels of expertise... 6 Stages Of A Trader | Bramesh Technical Analysis

One quote I found particularly interesting, and some of our subscribers and system followers don't seem to understand yet was...

"He [the trader] understands the inevitability of loss and accepts it as a natural part of the business of trading. No one can hurt him because he’s protected by his rules and his discipline."



The SPY (S&P500 / C-fund) is trying to push toward new highs but the weak close on Friday was a little disappointing. It did keep the short-term rising trend going so nothing is broken yet. As a matter of fact, we may be seeing the right shoulder of an inverted head and shoulders pattern forming. Should that get completed an initial breakout target for the SPY would be about 220 or about 5%, but it has to breakout above the neckline first before we start counting our money.


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


The weekly charts of the S&P 500 shows a lower high and a lower low over the prior week's bar, but it did close near the top of the weekly bar and it is still in a long-term rising trend.



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


The Dow Completion Index (S-fund) tested the 50-day EMA early on Friday but backed off closing just off the lows. It did close with modest gains but you can see that there is resistance overhead that it is going to have to deal with if it is going to break the intermediate-term descending trading channel. There is some possible support at 1100.


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


The
EFA (EAFE index / I-fund) has given itself lots of options after Friday's action. It gapped up above the 50-day EMA, which is good, but it is still in a downtrend, which is bad, but we may be seeing an inverted head and shoulders pattern here as well, which is good. While it has a descending neckline, inverted head and shoulders tend to break out above the neckline, although there is more to consider here.


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


The
AGG (bonds / F-fund) had a big day on Friday gapping higher and making its highest close since May. It has closed above the 50-day EMA for 7 days now so perhaps this is the real deal for bonds? Why are bonds going up? I'm not sure, unless it was just a safe haven play because we're not seeing too much in the way of data to warrant the rise in bond prices and drop in yields.


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


Posted daily at www.tsptalk.com/comments.php

The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.

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