TSP Talk Blog

Stocks opened higher on Monday morning, but flattened out and by the close it was a mostly flat to slightly positive day, depending on the index. The Dow lost 5-points while the S&P and small caps added less than 0.1%. The Nasdaq and Transports and led with modest gains.

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Insurance companies and energy stocks were down as a reaction to the historic hurricane, weighing on the larger cap indices, while the weak dollar benefited the usual suspects - the small caps and particularly the I-fund.

It was a very slow trading day with light volume on Monday but now, as I write this Monday evening, I am hearing about the Japanese government warning that North Korea has launched a missile toward Northern Japan, and apparently it passed over Japan and landed in the Pacific Ocean . This is a developing story and obviously has the potential to be a major market mover, and the S&P futures opened down about 0.75%. We'll have to see how that translates into Tuesday open. Let's hope that it is not as bad as it sounds.
The August Jobs Report gets released this coming Friday and consensus estimates are looking for a gain of about 185,000 jobs and an unemployment rate of 4.3%.


The SPY (S&P 500 / C-fund) closed above the 50-day EMA for a 2nd straight day but I think we have to throw the short-term analysis out the window until we see what is happening in Japan. The futures are down and if they stay down into Tuesday's open it may be enough to fill that open gap near 243. Of course everything could change by the open so I don't really have much to add.




The DWCPF (small caps / S-fund) hit the 20-day EMA and was nearing some descending resistance. It managed to close with a small gains but of course with the North Korean missile launch, that could be erased today.




The EFA (EAFE Index / I-fund) was flat but the dollar was down sharply for a second day helping to push the I-fund in positive territory.




The Dollar (UUP) broke down from its bear flag last week and yesterday it made a lower low, potentially starting a new leg down.




The price of gold shot up yesterday as if there was some leak about the North Korean missile launch, but much of that had a lot to do with the falling dollar. But the news sent the gold futures even higher - up near 1326.




The AGG (Bonds / F-fund) is also flirting with highs and if you remember I had been talking as if the bond traders are onto something that the rest of the market has not reacted to. Well, any kind of geopolitical turmoil will likely send bonds higher, even if temporarily, but they seems to be ready for this news out of the Far East.




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

Tom Crowley


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