TSP Talk Blog

What a day and it was a microcosm of the entire year. The bears got there time to shine but they are turned back yet again by the bulls as we saw some stiff early losses disappear, in some indices, by the close. The Dow lost 37-points but the S&P 500 nearly got back all of its early 12-point loss. Stocks rallied strongly into the close and we have to wonder if the FOMO traders (fear of missing out) are the ones calling the shots.

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Not all of the indices were treated equally. Once again the large caps held up well while the small caps fell to a one month low.

The North Korean scare came and went and I guess it is going to take some actual action to scare off the bulls. It's not quite like the 2000 dot com action, but it was the same feeling... buy every dip or you'll miss out. Of course that didn't end so well, but a lot of money was made while it was going on.


The SPY (S&P 500 / C-fund) bounced strongly off the morning lows where it had been down about 0.5% in early trading. The 20-day EMA held but that big negative reversal is staring right at us and they don't usually go away that easily - meaning it looks like a fairly serious peak. If you look at long term charts, they tend to stand out for more than just a day or two.




The DWCPF (small caps / S-fund) fell 0.66% yesterday and from late July's peak to yesterday's low we have seen a 3.1% dip. It's now close to testing the rising support line and if you believe this rising trend is going to continue, it could be an opportunity. But that early July low near 1212 needs to hold or we'll see our first lower low in a while, and that would break the rising trend.




The Dow Transportation Index closed flat and produced a modest positive reversal day, but Tuesday's negative reversal is a lot more pronounced. Plus the bear flag is still intact and we have to be cognizant of its ability to break down hard as it did with July's bear flag.




The HYG did not rebound like the large cap stocks, and that's kind of interesting. The 50-day EMA has held for months so it's in a precarious situation right now.




The recent action has sent the CNN Fear & Greed Index back to neutral after briefly hitting 70 last week. So while we see signs of over complacency, this kind of indicator shows us that investors may be quick to get nervous. They just aren't selling - or someone isn't selling.

Source: Fear & Greed Index - Investor Sentiment - CNNMoney

The AGG (Bonds / F-fund) posted a negative reversal day moving in the opposite direction of stocks. As the North Korean tension eased, so did investors as they bought stocks and sold bonds in the afternoon. It is back within the triangle after a brief breakout yesterday.




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

Tom Crowley


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