TSP Talk Blog

Stocks ended the day mixed again yesterday and fairly flat for the large caps, but the day saw a little more excitement than the closing prices might suggest. The Dow ended the day up less than a point while the S&P was down less than 2. The Nasdaq and small caps had decent days while the Transports and the financials posted rather negative days.

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At about 11 AM ET yesterday we saw some political turmoil shakeup the market as the Dow went from being positive to down about 130-points within minutes. The program trading seems to intensify the trading, but once the indices hit those 50-day EMA's again, everything turned back up as if nothing had happened.

Another interesting development yesterday was comments from Jamie Diamond (JP Morgan) saying that the Fed’s unwinding of its balance sheet may not go that smoothly and could be an issue for the market, but there are many who disagree.

Today we get the Fed Beige Book and Yellen delivers a Monetary Policy Report today, so we could see more intraday swings.

The SPY (S&P 500 / C-fund) continues to trade in slightly descending consolidating pattern that has been holding up very well at the 50-day EMA lately. That's 4 successful tests and we could see the bulls take that and run, but when you keep knocking on the door (of the 50-day EMA) at some point someone may let you in (breakdown below the 50-day EMA) so if I were the bulls I wouldn't waste too much more time here. They need to make their move or else the bears probably will.




The DWCPF (S-fund) bounced off the 50-day EMA again but the action kept it within a bear flag. It still looks like a decent consolidation but not if that bear flag breaks down, which would likely take it below the 50-day EMA.




A long-term view of the Russell 2000 small caps shows a very large bearish rising wedge pattern. While that looks ominous and the downside seems to be the path of least resistance, it is not a good judge of what will happen in the short-term. But over the next 6 - 18 months we could see a test of the lower support line again, and of course rising wedge patterns tend to break below support.


Source: www.chartoftheday.com


The Nasdaq 100 had another solid day yesterday giving it its 3rd consecutive positive day after falling sharply before the jobs report. The question is whether that is a bear flag because the rising angle is pretty sharp and that could almost be interpreted as a "V" bottom.




The Dow Transportation Index fell back below the March highs so it's still wait and see whether we get that double top pullback.




The EFA (EAFE Index / I-fund) was up nicely on Tuesday as the dollar resumed its downward action after a couple of positive days, helping out the international fund. The 50-day EMA is holding but there has been some technical damage done to the chart.




The AGG (bonds / F-fund) was up but it looks like another bear flag that should eventually break down. The 50-day EMA is holding right now so we could see if this flag is going to breakdown by the end of the week. With Janet Yellen speaking today and the Beige Book being released, there is ammunition for a potential big move in bonds today.




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

Tom Crowley


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