TSP Talk Blog

The jobs report on Friday came in with a hefty 261,000 jobs being added in October, but that was quite a bit below analyst expectations and stocks initially moved lower, but that didn't deter the bulls who have been relentless in their effort to buy any and all dips over the last few months. The Dow ended the day up a slight 23-points, or 0.1%, but the broader S&P 500, and particularly the big tech heavy Nasdaq, saw more meaningful gains.

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The unemployment rate hit 4.1%, the lowest reading in about 15 years, but the participation rate also fell so it doesn't necessarily mean more people are working, but clearly the jobs market doesn't seem to be a problem.

Another pop in the dollar following the jobs report kept the I-fund from participating in Friday's rally.

The S-fund was up on Friday but the Russell 2000 small cap index was down, and the Transports were down moderately as well. Both have been moving sideways to lower since early October, but both have held firmly near some very important support. The charts look promising when taken by themselves, and that's a very big deal, but some of our indicators are seeing issues in the underlying market internals so this in an ongoing battle.

We're heading into the stronger seasonal months of the ear and the question is whether the market can keep it up, after rallying during the weaker months of the year. And even if it does rally, does it need a bit of a cleansing, or exhale, at some point in there before making a push into the end of the year?


The SPY (S&P 500 / C-fund) rallied nicely on Friday pushing it to yet another new high. You can see by the circled bars that any attempt to pull this market down has been quickly reversed, so much so that we still haven't had a 1% daily decline in 3 months.




The DWCPF (small caps / S-fund) has been consolidating for weeks and holding fast at the 20-day EMA. This could be very healthy action as it worked off its overbought conditions from early October without much of a pullback. The lack of a pullback can be a concern, but the consolidation can be equally effective. At this point interest rates and tax change considerations are still an unknown and that could be the reason for the lack of conviction from either side.




The Dow Transportation Index lost 0.24% on Friday but held again at the 50-day EMA and that falling wedge formation is a form of a bull flag and it looks ready to bounce off of that support. We're still watching that blue rounded top formation for possible resistance and that would be the only reason not to really like this chart.




The EAFE (I-fund) was down on the day and the rally in the dollar was again the main factor. The trend continues relentlessly higher here, but if the dollar (not shown) can crawl back above some strong resistance it is currently testing, the I-fund may eventually find some roadblocks. But until then, it's tough to argue with this success.




The High Yield Corporate Bond Fund is in an interesting situation where a possible bullish flag is nearing multiple levels of support, but the lower high and lower low that we see could be the sign of a change in trend. It's a waiting game at this point and it seems to need to hold above the 87.80 area or the chart will turn negative.




The AGG (Bonds / F-fund) got a boost from the weaker than expected jobs report. Evidence of an economy that is slowing will push yields down and bond prices up, but this may have only been a reaction caused by the larger expected jobs number being missed. We'll have to see if this really becomes a bond market trend changer.




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

Tom Crowley


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