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Still quiet in front of Yellen

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Stocks were mixed Thursday with larger stocks slipping moderately while the small caps posted a modest gain after Wednesday still losses. The Dow lost 33-points and the Nasdaq was down for a second day in a row, for the first time in two-months. Our small caps gained 0.21%.

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I'm back from my vacation and back on a normal schedule, but with Janet Yellen set to speak on Friday morning, much of the analysis may be useless and we'll be looking at the emotional reactions to whatever she has to say. Thanks for your patience while I was gone - particularly those who need AutoTracker or Premium account help.

Despite concerns that the Fed wants to raise rates, I still believe that Ms. Yellen will not want to do anything to jeopardize a market whose action could determine the presidential election. One of the top Federal Reserve governors, Lael Brainard, surprised many by giving $2700, the contribution limit this election year cycle, to the Hillary Clinton campaign, despite the fact that the institution considers itself politically independent. Also, Barrack Obama appointed Yellen so I think a good case can be made that they may not want to ruffle things before the election.

The SPY (S&P 500 / C-Fund) closed a few cents below the 20-day EMA on Thursday, which is the first time it has done so since June. It remains in the middle "section" of the three tiers of trading levels of this consolidation. The action looks a little concerning but the long, long sideways consolidation makes it possible that any strength stocks have lost after being overbought after the post-Brexit rally, may have been revitalized. The dips buyers have been hanging around but most recently the bears have been wearing them down a bit. Every move down to the current level over the last three weeks has been bought. Let's see what they do today.




The DWCPF (S-Fund) has outperformed in recent weeks with higher highs and higher lows being created consistently off the Brexit lows.




The Dow Transportation Index actually looks deceivingly strong with the two inverted head and shoulders forming and the small one (blue) breaking out last week and now testing the neckline. Classic H&S action.




The EFA (I-fund) is hanging around the 2016 highs with a flag formation, albeit a little sloppy, having formed near the highs.




The price of oil was up yesterday but has been pulling back from it's recent peak. So far a lower low has been made but it had gone nearly straight up all month so a little pullback is not much of a surprise. It hit about $49 at the peak in August and as we've been saying, if it floats between $40 and $50 the stock market may not be too concerned.




The CNN Fear & Greed Index has backed off quite a bit in recent days, weeks, and even months. A week ago it was at 78. A month ago it was at 85. So the sentiment in the market has shown some nerves out there compared to earlier in the summer, and that's better than an all out greedy crowd.




The AGG (Bonds / F-fund) is also consolidating and has moved sideways within flag-like formations for weeks. Something is going to give and perhaps Yellen will cause a breakout in one direction or the other today, but of course she may keep things vague and it will be back where it has been for many weeks.




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. Have a great weekend!

Tom Crowley


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

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