TSP Talk Blog

Stocks rallied from the opening bell on Friday after the announcement of the July jobs report. The economy added 255,000 jobs, which was about 80,000 more than expected. The unemployment rate remained at 4.9%, which was actually a tick higher than expected. The Dow gained 191-points on the day while the S&P and small caps each added just under 1%. The Transports had a big day with a 1.9% gain, greatly improving that chart which needed help.

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So despite an economy growing just over 1% in the 2nd quarter, the jobs market seems to be stabilizing. We believe the Fed is on hold as far as interest rates goes - mainly because that weak 1.2% GDP figure gives them an excuse to hold off until the election, but if the jobs report is strong again in September, they may have some pressure on them to act - but I still say they won't.

The S&P 500 (C-Fund) broke out above that stubborn trading channel on Friday with the help of the strong jobs report. We suspected the report would be a catalyst for a breakout, but in which direction was question. Volume wasn't all that explosive like you would want to see during a breakout, but we're in the dog days of August and many Wall Street pros are taking their summer vacations. Bottom line, the breakout to new all-time highs is big, but this week we will give it the 3 to 5 day test to confirm it.




The weekly chart of the S&P shows that the breakout from the large inverted head and shoulders pattern this summer is holding up and still heading in the direction of that initial upside target we talked about last Monday of near 2200. Another bullish development is the positive outside reversal weekly bar created last week. That's normally a sign of more short-term movement in the direction of the of that reversal bar.




The DWCPF (S-fund) had fallen below the F-flag formation but Friday's rally moved it back within that rising trading channel. So we have new highs and the bottom of the flag is the support area we'll be watching - as well as the 20-day EMA which held on the last pullback.




The Dow Transportation Index had a big day gaining nearly 2% on Friday, and it couldn't have come at a better time. This chart was breaking down and was also in the process of creating a small bear flag, but the rally broke that pattern and it could be back in business. It's also back above the 20, 50, and 200-day EMAs.




The EFA (I-Fund) has been stabilizing above the 200-day EMA for nearly a month but without really getting too far. Technically it is holding up fine, but unlike the U.S. indices, it is still well below the 2016 highs.




The strength in the dollar held the I-fund back on Friday and the dollar has been moving higher since making a high lower earlier last week. It's now back above the 200-day EMA.




The AGG (Bonds / F-fund) fell sharply on the jobs report as signs of strength in the economy sent yields higher since the Fed is a little more likely to consider a rate hike in September or by the end of the year. The pennant formation is still bullish for bonds for now - unless that support breaks of course.




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

Tom Crowley


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