TSP Talk Blog

Stocks were mixed again on Friday, but once again the bulls were able to take the indices well off the early lows. The Dow ended the day up 24-points while the S&P was flat, and the small caps and Nasdaq posted small losses. The Nasdaq continues to be the laggard after months of leading to the upside, and that is the main concern for investors right now as the tech stocks are held up by a moving average that is hovering over a potential precipice.

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It's been a very interesting month of June. After the initial June 1 rally, stocks have basically chopped back and forth, moving mostly sideways, but the bulls have been able to thwart every attempt by the bears to push this market lower.

We have passed earrings season and the Fed's rate hike is now in the rearview mirror so the market is going to be on the lookout for a new catalyst, and if I had to guess, I'd say the talk of President Trump and possible obstruction charges may be the key. With Trump under constant pressure from his adversaries, attempts to get his tax reform through may be in jeopardy and the market may not like that.

This is a post options week and typically the week after options expiration is historical fairly weak in June.


Chart provided courtesy of www.sentimentrader.com


The SPY (S&P 500 / C-fund) started the day on Friday as we have seen time and again - early selling. But by the close the dip buyers showed up and once against the indies close well off the lows of the day. Looking at the chart it looks like a consolidation waiting to push to new highs. But the problem doesn't show up here, or in the Dow.




The Dow just closed at a new high and so we'd say that a chart that starts in the lower left hand corner, and ends in the top right is a bull market, and you buy dips during bull markets - which is what we've seen in the Dow and S&P.




The problem lies in the Nasdaq, and more specifically the Nasdaq 100 where large tech stocks have been giving back a lot of recent gains. This chart is being held up by the 50-day EMA, and that's a good place to hold, but if it fails there is not much support below. That could be considered a bear flag on the chart (red), which tend to break down, and if it does, technically it could be in trouble. And the broader market probably could not survive a breakdown in the Nasdaq.




The DWCPF (S-fund) has been holding firmly at the 20-day EMA, which is typical bullish action, but we did see a failed breakout last week - the third failure above 1230 in the last 2+ weeks. The chart looks fine if it wasn't for those failures, but clearly there are investors selling at those highs. It may need a catalyst to get folks buying over 1230.




The Dow Transportation Index has been impressive since it bottomed in mid-May, but we need to watch 9450 as it seems to be stubborn area of resistance right now.




The EFA (EAFE Index / I-fund) moved up to fill one gap (blue) while opening another (red). A test of the 50-day EMA after the recent rally seems like a healthy pullback for this high flying index.




The AGG (Bonds / F-fund) bounced back a bit on Friday but that open gap below sure looks enticing so this looks a little toppy here, but bonds have been surprising more bullish than most have suspected so maybe we shouldn't be surprised if they keep rallying.




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

Tom Crowley


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