TSP Talk Blog

Stocks opened lower on Friday after some weak retail and Producer Price reports. We saw an afternoon rally off the lows but the Dow closed with a 37-point loss, while the S&P and small caps were also down slightly, and the Nasdaq picked up a small gain.

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The interesting development last week was the new closing all-time highs in the Dow, S&P 500, and the Nasdaq on Thursday. It's interesting because that hadn't happened on the same day since 1999. Back in 1999 the S&P actually lost about 5% following those highs. The difference this time may be that stocks are nowhere near as over-valued as they were back then.

In 1999 the P/E - Price Earnings Ratio - in the Nasdaq 100 was 78.08. Right now it is 21.03. The S&P 500 P/E was 28.93 in 1999 and today it is 18.61. So there is precedence for some possible technical reasons for some selling from these highs, but fundamentally the situations are very different.


The SPY (S&P 500 / C-Fund) was off slightly on Friday but remains above the breakout line. The bulls haven't exactly piled on and followed through since the breakout, but neither have the bears done much to force the issue despite this lack of love for the market rally and its new highs. Charts that start in the bottom left and end in the bottom right are bullish and until proven guilty, I think it is safe to assume that the dip buyers will take advantage of any minor pullbacks.




The weekly chart also looks very good too and the inverted head as shoulders breakout is getting closer to its 2200 - 2250 initial target area. The breakouts tend to reach up to about the size of the larger shoulder so I'm assuming about 125-points above the 2125 breakout area. The recent high is 2186.




The DWCPF (S-fund) has flat lined since the pullback last Wednesday but it has been hanging around the recent highs. This looks like a matter of which side wants to take charge. If the bulls can't muster another push higher this week, the bears will likely get more aggressive. If the bears can't pull this under the recent highs, the bulls and the underinvested may just start buying with more authority.




The price of oil has reversed sharply this month after nearly free-falling all of July. It closed above the 20, 50, and 200-day EMAs so the technical picture is improving, and of course recently stocks have performed a little better when oil stocks falling.




The EFA (I-fund) has stalled twice now at the April 2016 highs, which isn't much of a surprise, but the question will be, how long can that resistance hold? It may depend on the dollar, which has been fairly choppy recently.




The High Yield Corporate Bond Fund closed at another all-time high, helping with some confirmation of the strength in stocks.




The AGG (Bonds / F-fund) tried to breakout of its flag formation but it closed weakly and back within the flag. We could see a breakout or we could see another journey to the bottom of the flag. Unfortunately it's not very obvious which will happen.




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

Tom Crowley


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