TSP Talk Blog

The market showed a little volatility, as we might expect on an FOMC meeting day, but most of the movement came before the policy statement was announced. We saw some larger early gains evaporate by early afternoon, but stocks tried to battle back and closed with mixed results again. The gained 58-points, but that was off the 140-point gain it had near the open.

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The Nasdaq closed down on the day, and the small caps also struggled as they continue to bounce up and down in a widening trading range with potential tax cuts and interest rate hikes looming large for them.

The news after the bell, aside from a plethora of mixed earnings reports, was that a new Federal Reserve Chairman may be nominated to replace Janet Yellen. The name being mentioned is Jerome Powell and the official announcement is scheduled to be made on Thursday, but apparently that is not set in stone and President Trump said he could change him mind in the interim. So, he's a definite, maybe.

The question has been out there, probably from the bears, of whether the strength in the normally weaker months of September and October will steal the thunder of the normally stronger end of year months of November and December? I don't believe that is the historical case, but I don't have the data to back that up.

We get the October jobs report on Friday and estimates are looking for a lofty gain of 300,000 jobs and an unemployment rate of 4.3%. Jobs Report Contest.


The SPY (S&P 500 / C-fund) made a new intraday high yesterday before pulling back within that megaphone formation that we've been highlighting. If we combine the top of that megaphone (blue) with the rising (red) support line, we could have a bearish rising wedge developing also.




The DWCPF (small caps / S-fund) also popped into new high territory but a negative reversal pushed it all the way back toward the bottom of its megaphone widening channel. It did find some support at the 20-day EMA and that was a good thing because had it closed below yesterday's low, it would have created a nasty negative outside reversal day. The normal reversal was bad enough.




The Dow Transportation Index is in an interesting situation. If we look at the red flag, or falling wedge formation, it looks like the 50-day EMA could turn out to be a great place for this to find support and reverse higher. But the bigger picture is whether that curved blue line is showing an intermediate-top forming.




The EAFE (I-fund) was having a great morning but things reversed and the early breakout may have turned into a fake out. It had a similar breakout / fake out in early September, and that actually worked out well for the I-fund as it gapped up the following day. The breakout in October was more traditional.




The dollar stopped going lower and the question will be whether the rebound off the lows is going to resume or if the 200-day EMA will be too much for the dollar, which had been falling all year until that low in September. Normally the 200-day EMA would hold at least during the first tests. We'll see.




The High Yield Corporate Bond Fund broke below a possible bear flag and posted a negative outside reversal day. That's kind of interesting since we haven't seen much negative action from this fund, although we did get a smoke screen negative sign in August that didn't really materialize into anything negative for stocks back then.




The AGG (Bonds / F-fund) got a boost from the Fed as it briefly broke above the descending resistance line before reversing down again and closing nearly flat. I'm surprised it didn't fill the gap during yesterday's volatility, but we'll see if the bond bears can do that before the week is up.




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

Tom Crowley


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