TSP Talk Blog

Volatility is alive and well as we saw wild swings on Wednesday after a strong open and an early 187-point gain in the Dow gave way to afternoon sellers and ended the day down 100-points. The indices were mixed however, as the S&P 500 was flat and the Nasdaq and small caps closed with modest gains.

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The strong open was triggered by an 11% jump in Deutsche Bank's stock, which has been getting clobbered lately and the cause of some of the banking concerns in Europe, but as soon as Janet Yellen took the hot seat in front of congress, investors seems to be content to take early profits.

Yellen and the Federal Reserve have sure painted themselves in a corner and their plan to "normalize" interest rates to justify their near zero rate for years, is backfiring as the economy continues to show signs of not being able to withstand rate hikes. You can tell rates are getting low when the G-fund gives us less than 0.005% for the day.

Japan's decline continued on Wednesday. Bond yields sank again briefly falling below 1.7% before closing at 1.705%, and the dollar closed lower after filling an overhead gap first.



Oh, and oil closed at new lows again.

So, was thee any good news? Despite some positive earnings reports after the close yesterday, the futures have struggled and opened in the red again Wednesday evening. But, the way things have been going recently, things can turn on a dime and it may not indicate how Thursday's market will open up.

The SPY (S&P 500 Index / C-Fund) filled the partially open gap early on Wednesday but it couldn't make much headway after that. The 20-day EMA and descending resistance has been a tough nut to crack, and that is what we should probably expect in a bear market.




The Dow Completion Index (small caps / S-Fund) closed near its lows of the day and it is holding precariously above the recent lows. I don't know about this chart. If there is a positive it is that there is an open gap above that still needs to be filled, and sentiment is so poor for small caps that a surprise rally could be in the cards. What would cause a rally? I don't know, but often the charts the indicators tell us before the news comes out.




The Nasdaq 1000 (QQQ) rallied early and climbed back above the January lows temporarily before breaking down again and unfortunately it looks like the start of another bear flag.




The Japanese Nikkei fell sharply for a second straight day on Wednesday closing at new lows, but there was a bit of a positive reversal day there.




Bond prices and the AGG were down as yields fell below 1.7% briefly yesterday and closed at its lowest yield in about a year.




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

Tom Crowley


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