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Bounce back

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Stocks bounced back on post-debate Tuesday after Monday's pre-debate sell-off. We did get a stronger than expected Consumer Confidence report that may have helped, but it was more emotional than that as we opined yesterday. The Dow ended the day with a gain of 133-points. The Nasdaq led while small caps lagged.

Daily TSP Funds Return

It was our theory yesterday, that we could see a "buy the news" reaction to Monday's "sell the rumor" sell-off once the debate was over. The overnight futures on Monday night went from down 45-points prior to the debate, to up 130-points as the debate was completing, but by the open all of those gains were taken away, putting some doubt in our theory, but by the close those gains were back.

The indices didn't recover all of the losses from Monday's action, but it gave us some confirmation that Monday's selling may have been a little emotional and overdone.

With the Fed behind us, the next debate not for a couple of weeks, and 3rd quarter earnings rolling in about the same time, we may be thin on catalysts until then. We do get the September jobs report a week from Friday and
tomorrow we get another estimate of the 2nd quarter GDP which is expected to be 1.3%.

The SPY (S&P 500 / C-Fund) posted a positive outside reversal day, although it didn't quite get back all of Monday's losses, nor did it completely fill the open gap. It just traded outside of Monday's range, closing near the highs. That's good for some short-term bullishness, but the top of the gap could stall any buying. If it doesn't, it means the dip buyers are still a force in the market.




The DWCPF (small caps) opened lower, found some support at the 20-day EMA and the recent rising support line. It may be a cup and handle formation that's getting ready to breakout similar to the Transports below.




The Dow Transportation Index broke out of the small bull flag we noted yesterday, which is within the large flag formation. This still has a bullish short-term and intermediate-term outlook but it is still fighting to get out a longer-term bearish trend going back to late 2014.




The High Yield Corporate Bond Fund also posted a strong positive reversal day, potentially cementing another higher low above the rising support line. Double tops tend to generate pullbacks, as we saw earlier this month, but it doesn't mean the rising trend is over yet. Like the two charts above, it may be a cup and handle formation.




The AGG (Bonds / F-fund) rallied early to fill the small gap left open early in September, before dipping back a bit. It too has been in a range temporarily breaking below it during the rate hike scare, and is now approaching the top of the range.



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

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