TSP Talk Blog

Stocks opened lower on Tuesday and the Dow was down and in jeopardy of having its longest daily losing streak in almost 40 years. But it didn't take long for the dip buyers to jump in and follow through with Monday's positive reversal and send the indices sharply higher for the day. The Dow, S&P 500, and small caps all gained about 3/4 of a percent, while the I-fund lagged a bit with a rebound in the dollar.

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The latest Consumer Confidence Survey came in at 125.6 and that's the highest reading since December 2000 (128.6). I've mentioned this before that, while it is great that consumers are feeling good, like many indicators when it starts to get extreme we have to be concerned about it peaking.

That December 2000 reading came near the end of the Dot Com bubble and this weekly chart shows what what happened to stocks afterward. Within 4 months the S&P was down about 21%, and before the bear market was over the index gave up about 43% after that December 2000 report. Disaster.




I'm not saying stocks are about to rollover and lose 20% to 40%, but the overconfidence could be a sign that the market needs a cleansing to bring us back to more "normal" readings.

That may not happen overnight and the market should give us clues, and one of those clues will be when the dip buyers take a few bumps and bruises. So far this week, the dip buyers are doing business as usual and getting paid.

The SPY (S&P 500 / C-fund) is now back above all of the concerning support lines that we have been following. There is some minor resistance coming off the recent highs, and we've already had one lower high since the March 1st peak. We should know soon enough if we get another or if we're heading to new highs.




The DWCPF (S-fund) pushed above the 50-day EMA yesterday and ran into the 20-day EMA. The 20 should not be a problem once the 50-day EMA is taken out, so I'd expect to see this test that descending resistance line near 1196 next.




The Dow Transportation Index had a huge day, a day where oil finally closed positive. The descending trading channel was broken on the upside and now the 20 and 50-day EMA's are in the way. If the Transports are rolling over into a bear market, the 50-day EMA should pose some problems, so we'll find out.




The EFA (I-fund) was up again on Tuesday and it made a new multi-year high.




The dollar rebounded to hold the I-fund back some, and it filled one of the open gaps with one more gap overhead. It also closed back above the 200-day EMA so perhaps it is finding some support here.




The AGG (Bonds / F-fund) was down sharply yesterday, pulling back from the resistance line we talked about.




The yield on the 10-year Treasury was testing that 2.3% area again, and it has been holding tough since December. On the upside, the yield has not been able to do much once it gets near 2.6%. Right now it looks to be bouncing off of 2.3% again, which would mean trouble for bond prices and the F-fund.




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

Tom Crowley


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