TSP Talk Blog

Stocks were lower in early trading but some dip buyers showed up and it turned out to be a relatively quiet day on very light volume as most of America was outside sun gazing. The Dow ended the day up 29-points, which was about 100-points off the lows. The Nasdaq finished with a small loss, but for the most part stocks were flat.

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The eclipse kept the media away from the political turmoil and it may have just been a temporary distraction. Light volume is not uncommon this time of year because of late summer vacations, but that can sometimes mean large moves because of the ease in which the indices can be pushed around when liquidity is diminished.

The bulls may have been given an opportunity yesterday as the bears were quiet, but they didn't really take advantage. We'll see today if the bears are ready to resume their selling today, or if the bulls are more willing to jump on some of the lower prices, particularly in the small caps, which have been hit the hardest.


The SPY (S&P 500 / C-fund) made a lower low in early trading but quickly caught a bid and it flirted with small gains the rest of the day. There's some rising support coming up near 242 but if that breaks, look how far down the 200-day EMA is. So, for now the bottom of that channel is holding, but it must or there could be trouble.




The DWCPF (small caps / S-fund) was flat but it posted a positive reversal day after successfully testing the 200-day moving average at the open. This index is very oversold but you can see that a couple levels of support have already been broken. That 200-day MA really needs to hold for the bulls.




The Dow Transportation Index has been testing that 9100 levels for a few weeks now, just above the 200-day average. The 9050 - 9100 are the levels to watch.




The EFA (EAFE Index / I-fund) was flat but the dollar was down 0.29% so it got a bit of a cushion. It's also holding its 50-day EMA and a rising support line.




The London FTSE chart is typical of the European markets that have been trending lower. This is the largest holding in the I-fund and you can see that the 7300 area is the only thing keeping it from testing the 200-day EMA. The question is whether the weakness in the dollar is enough to keep the I-fund afloat if these European markets break down.



I was hearing some talk about the economy and the market action in regards to whether it is signaling an upcoming recession. I remember a few moths ago we were asking the same question when the price of copper was flirting with breaking below the 200-day EMA. Instead, copper held at the average and since then has been performing very well. Yes, the weakness in the dollar helps the price of commodities, but this has been an impressive rally for the economically sensitive metal.




The AGG (Bonds / F-fund) was up slightly and is testing the top of the that rising resistance line (blue). The rising red trading channel (red) seems to indicate that there is more room on the upside if it were to test that resistance, but it has to break through that blue resistance line to get there.




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

Tom Crowley


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