TSP Talk Blog

The Dow continues to lead as it was one of the few indices that posted a gain on Thursday, although gaining just 10-points, but that makes 7 straight positive days. The S&P 500, Nasdaq, and the small caps all saw modestly lower prices yesterday, while the Transports posted a moderate gain after bouncing off its 200-day SMA.

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The Dow is up about 250 over last week or so while S&P is down slightly during that time, which shows the divergences in the indices. To magnify that more, the small caps have been getting hit as the Russell 2000 has now been down 6 of last 7 days, and the Transports have been down 10 of the last 14 days.

So, we're seeing a little unnoticed pullback as the market internals are weakening while the Dow is hitting new all-time highs and making the headlines.




The charts posted below tell a different story.


The SPY (S&P 500 / C-fund) has been in a very tight range over the last couple of weeks. I read that the last two weeks have seen the smallest ever range in the S&P 500 when it also hit a 52-week high at some point during those two weeks. The only other time we came close was in November of 1961. The S&P then broke higher and rallied for a couple of weeks after that, then lost 28% over the next six months. So a little breakout might get anyone who has been getting a little nervous, back into stocks, and possibly at exactly the wrong time.




The DWCPF (small caps / S-fund) has been moving down with a little more seriousness recently and for a second straight day it tested the 50-day EMA, but held. Just like it did in July, but it did close below the rising support line for the first time.




The Dow Transportation Index is getting a little support from the 200-day SMA (simple moving average). We don't usually show the SMA but if it is being watched by the big money, it needs to be on our radar, and so far the big money seems to have stopped selling at the 200-day SMA. However, it could just be an oversold bounce so we'll see what kind of upside follow-through we get here.




The EFA (EAFE Index (I-fund) has become a creature of the dollar. As I have mentioned a few times, we're seeing some cracks in the European markets, but you wouldn't know it looking at the chart of the EFA.




The AGG (Bonds / F-fund) did break above that cup and handle formation that we have been talking about. This is something we'd expect to see if stocks were falling, so something is going on here, although we've seen this kind of action for several months now where stocks and bonds were rising together.




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Thanks for reading. Have a great weekend!

Tom Crowley


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