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Some warning signs but stocks continue higher

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Stocks bounced back from a negative open on Wednesday, drifting higher most of the day and closing with slight to moderate gains. The Dow gained 6-points making it another record close, while the Nasdaq also closed at a record level after its 21-point gain. There were some concerns yesterday, and we'll talk about them below.
Daily TSP Funds Return

Small caps posted a positive reversal day after a weak open and an early break below the 50-day EMA. The Transports however, opened lower and closed down for a 5th straight day, and a 7th loss in the last 8 trading sessions. The High Yield Corporate Bond Fund, which can be a good indicator for the stock market, broke down below a long-term rising support line.

The Senate tax plan is scheduled to be released today (Thursday) and we know the market is hanging on every issue in these bills, and to me it seems like the reason stocks refuse to pull back. Everyone is afraid to be on the sidelines when the final plan is announced, but a sell-the-news reaction is very possible since nearly everyone seems to be in stocks already.

The market is open on Friday despite it being the observed day for Veteran's Day and a Federal holiday, but that means the TSP will be closed. From www.tsp.gov:

HOLIDAY CLOSING:
Some financial markets will be closed on Friday, November 10th in observance of the Veterans Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Friday night (November 10th) will be processed Monday night (November 13th), at Monday's closing share prices.


The SPY (S&P 500 / C-fund) made a new closing high as it inches higher with these small 0.1% kind of moves. The trend is clearly up but how long can it go without a meaningful pullback? It has been months since we had a 1% down day, and it's been 8 months since we saw so much as a 3% pullback overall, something we normally see 3 or more times each year.




The DWCPF (small caps / S-fund) keeps falling from those new high levels but it also rallies when it hits the support line, and it did so again on Wednesday. yesterday's positive reversal could mean some upside in early trading but the 20-day EMA could pose some resistance now that it is below it.




The Dow Transportation Index tried to bounce back from an early loss, and it did close slightly above the lows, but this chart broke down this week but we won't call it official until we get a 3rd, and maybe even as much as a 5th close below support and the 50-day EMA.




The EAFE (I-fund) continues on its merry way higher despite the dollar also rallying of late. That's a small bull flag within that rising channel so just look out for that rising support line for a sign of trouble. Until then, this chart looks good.




The High Yield Corporate Bond Fund broke down for a second straight day yesterday. On Tuesday it broke below the 50-day EMA and a short-term support line, and yesterday (Wednesday) it was a major support line that was taken out. Put this one on your warning list.




The AGG (Bonds / F-fund) was off slightly yesterday and may be running out of steam, but it had a nice run over the last couple of weeks so I wouldn't be surprised to see a pullback to test the old resistance line that it broke above last week.




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: www.tsptalk.com/plus.php

Thanks for reading. Have a great holiday weekend, and a big thank you to all of our veterans out there!

Tom Crowley


Posted daily at www.tsptalk.com/comments.php


The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.

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S&P 500 (C Fund)
S&P 500 INDEX,RTH (^GSPC)
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)