TSP Talk Blog

Depending on if you are a glass half empty / glass half full type of person, you may have looked at Monday's action a little differently. The Dow gained 130-points, which certainly helped the bulls, but it also closed 142-points off the morning highs, setting up a possible negative reversal. Small caps outperformed the large caps again, and the I-fund had a huge day with the help of weakness in the dollar, and of course the weekend Brexit polls, which was the trigger for this global rally.

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A big gap opening, particularly on a Monday morning, has a tendency to want to get filled rather quickly, often the same day. The gap did not get filled, but it wasn't too far off. Once those gaps get filled the pressure is taken off and the bottom of the gap can act as support.

This wasn't a runaway gap which tend to get the bears nervous and panic buying to keep from being left behind, but if and when the open gap is filled they may feel like they caught a break being able to buy back where it was before the gap, and that's why it could provide support for the market. The question is, does the negative reversal outweigh the support at the bottom of the gap?

The S&P 500 (C-Fund) temporarily popped back above the rising support line, only to fade during the day and close back below it. That's five closes below the support line, which could be a problem, but the fact that the 50-day EMA has held on a closing basis every day during this pullback is encouraging. Tuesday's action could be very interesting as this battle continues.




A closer look at the SPY, which trades the S&P 500 like a stock, shows the gap left open between 207 and 208. It tried to fill that overhead gap near 210 but came up short. The big kangaroo tail reversal does not look encouraging but it is possible that it just needs to go down to fill that open gap near 207 before finding support.




The DWCPF (S-fund) also reversed down but it did not close on the lows like the S&P 500, and the 1% gain pushed it back above the 20-day EMA. So small caps continue to lead and they are holding above key support.




The EFA (I-fund) had a huge day with the help of the Brexit polling and another decline in the dollar. It has now filled two of those prior open gaps (blue) while opening another big gap between about 56.50 and 57.75. It looks like Swiss cheese and chaos, but most of those gaps will eventually get filled to clean up the mess.




The dollar (UUP) was down 0.57% which pads the I-fund. There was a bit of a breakdown in the UUP chart.




The AGG (Bonds / F-fund) gapped down Monday morning and is falling from the resistance of that long-term rising trading channel. That open gap is going to get filled one day. The question is whether it is heading there now, or if it will be a more rare gap that remains open for a more significant amount of time.




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

Tom Crowley


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