TSP Talk Blog

Stocks started the post-holiday week with a bit of a reversal from last week's action. The light volume small gains late last week were met with light volume small losses on Tuesday. That ended a 7-day winning streak for the S&P 500. The Dow lost 51-points on the day and the losses were fairly muted across many indices, although small caps lagged again.

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For the first time in a while we saw stocks weaken toward the close, but the action wasn't overly meaningful as trading volume remains light while folks come back from their long weekends.

Bonds broke out to the upside of their bull flag.

Looking forward to the next possible catalyst for stocks, we get the May Jobs Report this coming Friday. Estimates are looking for a gain of 185,000 jobs and an unemployment rate of 4.4%.


The SPY (S&P 500 / C-fund) has been consolidating since the gap up open last Thursday. That gap remains open and may be the initial target for any further pullback from the recent peak which is the top of a large rising trading channel. There is support in the 240.50 - 241.00 area, but if that fails the 20-day EMA would be the next target. For now it looks like it may want to try to create a bull flag off the May 18 - 25 rally.




The DWCPF (S-fund) continues to lag and it lost 0.58% on the day. There's that red bear flag that played out by breaking down a couple of weeks ago, and now it has found its way back into that flag. It could be an inverted head and shoulders pattern forming, and that would be a fairly bullish development if that turns out to be the case.




The Russell 2000 charts shows just how much the small caps have been consolidating after those large post-election gains in late 2016. You can see that important red support line that was already successfully tested once in May. Is that where this recent downturn is heading again?




The Dow Transportation Index was down slightly but remains above that important descending resistance line and the 50-day EMA for another day. But this is still considered a holiday environment and may need a couple more days to determine if the breakout is for real.




The Japanese Nikkei has paused near some recent highs and technically the 19,800 - 19,900 is key for this market that makes up 24% of our I-fund. It has a huge upward move from 18,200 to digest and it looks like it needs a rest like the U.S. market, but this one may be more necessary.




The dollar was off slightly again yesterday and now we see a pretty clear bear flag formed after the one that broke down earlier this month, so it looks like we could see another push lower.




The AGG (Bonds / F-fund) was up on Tuesday and it broke above its bull flag, as we'd expect a bull flag to do. Again the question I keep asking is why are bonds rallying when interest rates are going to be raised and the economy is supposedly firming? This could be another canary in the coal mine for the stock market.




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

Tom Crowley


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