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Pockets of strength, but will oil move too high?

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It was a modestly higher day on Wall Street Monday as Nasdaq led the way with a 0.33% gain, while the Dow gained 9-points and the S&P added 3. The small caps were up nicely while the Transportation Index was down and continues to test important support.
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The weakness in the Transports may be related to the price of oil rising lately, and if you've seen the headlines out of Saudi Arabia, they may be on the brink of war over there, so oil may not be done going up.

Oil closed at a two plus year high yesterday as it moved above $57 a barrel. So even if we get some kind of new tax cuts, and folks are still debating whether the current plan will help the middle class tax payers, the rising price of oil has a similar effect as rising tax rates, and it hits just about everybody, but of course Transportation related companies would be hit the most.

The SPY (S&P 500 / C-fund) made another new high, which seems to happen almost every day lately, but we are seeing a rising wedge forming, which is normally a cautionary sign, but in this market... who knows?

The DWCPF (small caps / S-fund) rallied and continues to form a nice looking base since its early October peak. The one negative is that each time it tried to make a new high since then, it sold off rather quickly.

The Dow Transportation Index was down but the 50-day EMA has been holding stubbornly. That is key because if you look at prior breaks below the 50-day EMA, the index quickly fell sharply lower. We're watching the price of oil here for clues here.

The EAFE (I-fund) was up slightly on the day but it has been stalling in this 69.50 - 70.00 area for the last several days.

The High Yield Corporate Bond Fund were flat and trying to hold on to keep from making another lower low. The stock market tends to pay close attention to this, which is why we do too.

The AGG (Bonds / F-fund) was up again and this break above the descending channel seems interesting considering the whole world is bracing for higher interest rates in the U.S. Perhaps it is just a temporary move for bonds, but the breakout must mean something? Perhaps it just really wants to fill that overhead open gap from September before moving down again.

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)