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Rebound weakening

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Stocks
sold off hard on Tuesday and the volatility resumed. After the largest 5-day gain in over a year, capped by a 400-point rally on Friday, the Dow shed about 300-points yesterday. A two day sell-off in oil seems to be the culprit, but financial stocks were actually hit the hardest.

Another possible catalyst for the sell-off, although this may be a stretch, is the strong showing by Bernie Sanders in Monday's Iowa caucuses. Love him or hate him, perhaps Wall Street seeing the support for a candidate who is an openly democratic socialist / anti-capitalist is an eye opener for investors, and the possibility of that mindset being in the White House could be a game changer for business in America. Of course there's a looong way to before any winner is declared, but Wall Street is always looking for a reason to move.

Daily TSP Funds Return
Yesterday I said, "... I still have my suspicion that this rally will eventually fail and we'll get a test of the lows. In the interim, maybe we can make some money."

Well, so much for making money. It's a little early to say we will test the lows, but that was my thoughts, although I suspected we'd get a more meaningful rally first.

Technically, the "V" bottom in the S&P 500 can still be considered intact, but the market leading Transports and small caps have potential ominous looking bear flags formed. At this point yesterday's lows probably have to hold or that test of the lows will be upon us.

On Friday morning we get the January jobs report and estimates are looking for a gain of 188,000 jobs, and an unemployment rate of 5.0%. The Jobs Report Contest is now open in the forum. Click here.

I'm taking my annual trip to warmer weather this week so market commentaries may be brief and my response time to email and messages may be slower. I apologize for any inconvenience.

The SPY (S&P 500 Index / C-Fund) is either still in the middle of a "V" bottom, but that new short-term rising support line needs to hold. The PMO indicator crossed above the 10-day average the other day, but often times the first crossover produces an overbought pause or pullback, and the 2nd crossover is the stronger trigger - similar to what we saw in September / October.




The
Dow Completion Index (small caps / S-Fund) has had a hard time since hitting the 20-day EMA, and now it looks very bear flaggy.




The Dow Transportation Index is in the same situation so the leaders are not leading in the right direction.




The EFA (EAFE Index / I-fund) opened a new gap up near 55 but as we've talked about, it may be looking to fill that gap below near 53 before advancing any further.





Oil, oil, oil! I was impressed that stocks were able to close flat on Monday despite a sharp drop in the price of oil, but a second consecutive sell-off in oil, pushing the price back below $30 a barrel, and stocks buckled.





The AGG (Bonds / F-fund) was up again and after filling the open gap on Monday, it made its way back above the resistance line. Very interesting, and possibly a warning for the stock market.




Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php


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

Tom Crowley


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

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