TSP Talk Blog

Just another down Friday, the seventh in a row for the Dow and S&P 500. The Dow lost 41-points on Friday with a similar percentage loss for the S&P 500. The small caps and the Transportation Index both lost about 1%.

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The government shutdown was averted last week as congress agreed to delay the budget vote another week, so we're in the same position this week, as last.

The situation with North Korea is the same and President Trump has not ruled out a military response and that may keep the market on edge this week, although the market continues to hold up well in the face of the fragile geopolitical environment.

Last week it just a few strong earnings reports and a positive outcome from the French election for the buyers to step up, so there seems to still be a bid under the market. This week there will be another heavy dose of earnings from some major players including Apple, but will there be enough good news to help keep the S&P 500 from trying to fill the two open gaps on its chart?

There's a two day Fed meeting this week but they are not expected to raise rates until June.


The S&P 500 / C-fund posted a negative reversal day on Wednesday producing a double top formation and it is now staring at two good sized open gaps that tend to demand attention before making too much more upside progress. In a perfect world for the market timer, those gaps would get filled and produce some support giving the bulls an opportunity to buy at a lower price, but it's rare that we are given that easy of a set up.




The weekly chart did break to the upside from that bull flag last week, but it produce the rare open gap on the weekly chart. It's the only one on this chart, which goes back to November of 2105, but it goes well beyond that. Again, those kind of gaps tend to get filled, but once filled it could find some support.




The DWCPF (S-fund) filled the first of its two open gaps after a nearly 1% decline on Friday. A move down to the 20-day EMA would fill the other gap, but that seems pretty obvious and the market rarely makes it easy for us and does the obvious.




The Dow Transportation Index filled its open gap last Wednesday and sold off again on Friday falling below the 50 and 20-day EMAs. That does look like a big bear flag so at the very least we must be prepared for a possible move to the bottom of the flag, and remember, bear flags tend to break down so this chart has a lot of work to do.




The EFA has been drifting sideways since the big two-day rally last week, and that's not uncommon. It has been outperforming all year and may just be building a bull flag, but those open gaps are clear as day and possible pullback targets.




The AGG (Bonds / F-fund) rallied on Friday as stocks pulled back and the government budget was delayed another week. The 20-day EMA has been holding this chart up so far, although it does look like a possible bear flag.




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

Tom Crowley


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