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Relief rally

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After going into a weekend with trepidation caused by the oncoming hurricane and the possibility of the North Korean's launching another missile, the market opened on Monday with some relief that, as bad as it was, the worst case scenario did not play out. The indices all jumped about 1% or more on the day as the Dow gained 260-points.

Daily TSP Funds Return

The thought now is that the aftermath from both hurricanes could act as an economic booster as the relief funds go towards rebuilding, so it could act like a sort of stimulus package and increase consumer spending, but of course that's not a national situation.

As we pointed out yesterday, the charts did have some bull flags on them and they were trading above the key moving averages, so a breakout isn't overly surprising, but the fact that the bears stood by and watched idly was a little surprising. But something tells me that this may have been a slight smoke screen because we have seen this before.

Out of curiosity I looked back at prior rallies on September 11th and saw some interesting. The market has rallied on each of the last four 9/11's, but pulled back, and in some cases dramatically, the following day each time.

In 2013 the S&P gained 5-points on 9/11. On the 12th it lost 6-points.

In 2014 the S&P gained 2-points on 9/11. On the 12th it lost 12-points.
In 2015 the S&P gained 9-points on 9/11. On the 12th it lost 8-points. The following days saw wild swings.
9/11 in 2016 was a Sunday but on the 12th the S&P 500 gained 31-points. On the 13th it lost 32-points.

So I don't know if the market shows some patriotic buying on 9/11, but exhales on the following day, but there is a slight pattern. September can be a wild month with a lot of volatility and perhaps it is coincidence.

So the breakout looks pretty good, but surprisingly volume wasn't all that high, and these kind of rallies to new highs in September have a tendency to get folks leaning the wrong way.

The SPY (S&P 500 / C-fund) broke out from that flag formation we mentioned yesterday, and closed at a new high. We have several charts with open gaps on them so the next few days may be fighting against the force of those open gaps, which like to get filled sooner rather than later.

The DWCPF (small caps / S-fund) is not at new highs as it lags the large caps, but it sill had a very good day. There may be some resistance in this 1240 - 1245 area, but some of that resistance is rising so the bears will be hoping for the gap to act as a draw to help pull this down again.

The Dow Transportation Index also gapped up and gained 1%, and it made a higher high above Augusts' high.

The EFA (EAFE Index / I-fund) gapped up and it keeps shining, but the dollar was up and that caused a bit of a headwind compared to the U.S. indices.

The High Yield Corporate Bond Fund was up with a solid gain but it did not make a new high and could still be in pullback mode from the recent double top, despite the gains.

The AGG (Bonds / F-fund) was down, as was gold, so the safety play was off while investors bought stocks yesterday.

Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to:

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

Tom Crowley

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S&P 500 (C Fund)
DWCPF (S Fund)
Dow Jones U.S. Completion Total Stock Market Index (^DWCPF)
EFA (I Fund)
iShares MSCI EAFE Index (EFA)
AGG (F Fund)
iShares Lehman Aggregate Bond (AGG)