TSP Talk Blog

It was a nasty reversal for stocks on Wednesday as a nearly 200-point rally in the Dow turned into a 41-point loss by the close. It was the worst reversal in 14 months. The charts had improved greatly with the early action, but the Fed Minutes and some comments from Speaker of the House Paul Ryan reversed everything.

Daily TSP Funds Return More returns

The ADP payroll report came out early and the market embraced it by opening higher and seeing some indices break above some key resistance levels. Then, later in the afternoon, we had a double whammy when the FOMC Meeting Minutes were released where the Fed actually commented on the price of stocks saying, in a nutshell, that they may be over valued. And Paul Ryan said that the House, the Senate, and the White House may not all be on the same page when it comes to tax reform.

Since stocks have been priced with outright optimism of presidential agenda including tax reform, anything disappointing will get a negative reaction, and that seems to be what we saw.

There's no doubt that the action was negative but I'm a little tentative to embrace the bear after one day since it was driven heavily by emotion rather than data. The data was actually good.

Do you remember the infamous call from then FOMC Chairman Alan Greenspan in December 1996 when he used the term "irrational exuberance" when discussing stock price appreciation? Well, stocks pulled back after that comment, but that pullback was quickly bought, and things resumed higher. I say the Fed knows about as much about stock prices as the average investor. They should stick with the economy.




The main concern I had with the action was that everything reversed. Gold was down sharply and came back to even. Bonds were down sharply, and they rallied back. The dollar was up and reversed to the lows. What was up went down, an what was down went up. So that may have been a little bit more than program trading but it may take a few days to find out. Small caps actually started to reverse lower before the Fed minutes, and that wasn't a good sign.

This Friday we will get the March Jobs Report and estimates are looking for a gain of about 180,000 jobs and an unemployment rate of 4.7%. After that strong ADP number yesterday, this jobs report better be good since everyone is anticipating a strong number now.

Admin Note: If anyone is interested in a free Master's Golf Tournament Pool, please click here for more info. The deadline is this morning before the first tee-time.


The SPY (S&P 500 / C-fund) broke above its bull flag formation early yesterday and it looked like it was off to the races. That's what we would expect from a bull flag, but the reversal changed all of that and it basically ran back down to the bottom of the flag.




The DWCPF (S-fund) started to reverse down before the Fed Minutes and that was a concern, and technically, it failed to hold at the 50-day EMA. We should know in a day or two if it was an emotional overreaction or not.




The Dow Transportation Index had broken above its bull flag and the 50-day EMA as the price of oil rallied early, but like everything else, oil and the Transports reversed for the worse, although the Transports actually only fell to about breakeven one the day.




The EFA (I-fund) reversed like all the rest and tested the 20-day EMA for a second straight day.




The HYG High Yield Corporate Bond Fund broke above its bull flag like the others, and closed back to the bottom of the flag.




The AGG (Bonds / F-fund) was down and reversed higher after the Fed Minutes and Paul Ryan. Was it more than an emotional reaction? We just have to see what happens over the next couple of days.




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.