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Narrowing flag continues

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Stocks opened sharply higher on Monday morning but drifted lower into the close and the big gains turned into moderate gains, but they were gains. The Dow picked up 89-points, about 70-points lower than the morning high. The TSP was closed so we don't have updated share prices for Monday, but yesterday's action will be reflected in Tuesday's prices. The prices below reflect Friday's price action.

Daily TSP Funds Return

Last Friday we got the September jobs report which came in about 20,000 short of estimates, and the unemployment ticked up to 5.0%. Stocks initially rallied on the number as it is going to help give the Fed something to think about before their next FOMC meeting, but by the close on Friday, the weak data sent stocks lower on the day.

On Monday we saw those losses reversed and tacked on a bit more, but we still have not seen any significant breakout from the converging flag formations on the charts. Another 3% spike in the price of oil was given some credit for the rally in stocks.

The SPY (S&P 500 / C-Fund) gapped up at the open but ran right into that descending resistance line and backed off. It closed near the lows of the day, but it did manage to close the gap created by that strong open. A negative reversal day is not a great sign for the short-term, but we know those open gaps are strong lures and now with Monday's gap already filled, the lure may not be as strong on the downside as it might have been if the gap was still open.




The weekly chart posted another "inside week" bar with another lower high and a higher low, but this chart also includes Monday's action and we've already seen a higher high above last week's high, although it's hitting resistance.




The DWCPF (small caps) had a nice day gaining 0.81% on Monday but it still was unable to break above its bull flag resistance line. This "should" break to the upside, but it doesn't mean we won't test the bottom of the flag again beforehand. On Friday the 50-day EMA was penetrated intraday, but it held into the close.




The Dow Transportation Index pushed back up toward the recent highs and it looks like it wants to breakout, but it has tried five times already and the bulls may get impatient if we don't see a meaningful breakout soon.




The EFA (I-fund) broke down on Friday from a rising support line but the 50-day EMA held by the close. There is some immediate resistance near 59.0 which will be the next obstacle.




The price of oil rallied 3% on Monday after a down day on Friday. It is back above $50 a barrel and testing the June highs, and a new 52-week high. Stocks seem to be enjoying this strength.




The AGG (Bonds / F-fund) was down slightly and remains just below the prominent range it has been in for months.




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

Tom Crowley


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

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S&P500 (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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