TSP Talk Blog

Stocks opened higher on Friday and despite some slightly hawkish comments about potential rate hikes from Janet Yellen in Jackson Hole, Wyoming, it looked like smooth sailing as stocks continued to rally for a few more hours. Then, in an interview with another Fed official whose words were a lot more hawkish, the indices started to move lower in a hurry, and the Dow ended the day with a 53-point loss. It felt worse that it was as the S&P slipped just 0.16% and the Nasdaq actually closed higher on the day, gaining 7-points. Small caps lagged a bit as they are more sensitive to interest rate changes.

Daily TSP Funds Return More returns

The GDP's second estimator came in at 1.1% on Friday and with the Fed now talking about a rate hike in September (which I don't believe they will do) the market seemed a little confused. Is the economy improving or remaining in a slowdown? Should they be talking hikes when the economy is barely growing?

The key is going to be the August Jobs Report comes which out on Friday morning and the consensus estimates are looking for a gain of about 175,000 to 190,000 jobs and an unemployment rate of 4.8%. This could be a case of the market wanting to see the number staying below 200,000 because any whiff of strength in the employment market and the Fed may be forced to make a move despite the fact that I don't believe that they want to raise rates before the election, as I have been saying.

The August Jobs Report Contest is now open in the forum. Click here for more info.

The SPY (S&P 500 / C-Fund) nearly hit new highs after Janet Yellen's speech but quickly reversed down to move to a 3-week low before rebounding and closing somewhere in between. If we connect the August low with Friday's intraday low it actually created a parallel channel with the overhead rising resistance line so that's a new support line that we will be watching after the 20-day EMA was broken.




A closer look at the SPY shows the early August open gap finally getting filled just before stocks rebounded off the lows on Friday.




The weekly chart of the S&P 500 shows a lower high and a lower low bar created, but nothing serious yet. It's always a good possibility that the breakout of the H&S pattern will come back to test the neckline before resuming the upside. It doesn't have to pull all the way back, but that would be clean technical analysis reaction.




The DWCPF (S-Fund) also tested the bottom of a rising parallel trading channel so this flag-like formation continues to play out. It's just extended a bit wider.




The Dow Transportation Index has a small (blue) inverted head and shoulders pattern within the right shoulder of a larger (red) inverted head and shoulder pattern. The blue H&S broke out and has come down to test the neckline and also the 50 and 200-day EMA's. These look like key areas that need to hold, and if they do the upside looks good. However, if the support areas fail, this chart will turn much more bearish.




The EFA (I-fund) reacted wildly to the Fed on Friday and the fluctuations in the dollar had a lot to do with that. The dollar (UUP) ended the day on Friday up 0.73% and the I-fund lost 0.78%, so there you have it.




The AGG (Bonds / F-fund) hit the top of its recent range before rolling over and falling below the 20-day EMA. The 50-day EMA and the bottom of the trading range, just above 112, is the support that needs to hold.




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. We'll see you back here tomorrow.

Tom Crowley


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

The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.