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Volatility returned last week - for a minute, anyway

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The market opened sharply lower last Thursday, followed by a decent afternoon bounce-back that took a lot of those losses away. Then stocks were mixed on Friday and the week ended with losses in both stocks and bonds. The Dow lost about 140-points since our last commentary, down 40 on Friday, and the action became more volatile.

The markets charts just below are from Friday while the TSP share prices and returns are only from Thursday since the TSP was closed and didn't update the share prices on Friday.
Daily TSP Funds Return

The Senate Tax Plan was released early on Thursday causing stocks to react negatively but the dip buyers were still lurking and would not let the bears take full control as the S&P closed well off the week's lows.

Some of the charts broke down last week while others held up well under the pressure and at key support levels. The Tax Cuts are still an unknown and it will be fight for the republicans to get anything through, but so far investors seem convinced that something will be done. Thursday's selling may be another sign that the cuts may already be priced in and that could mean trouble if a favorable deal is not made.



The SPY (S&P 500 / C-fund) moved sharply lower early on Thursday before bouncing back in afternoon trading, but struggled to add onto the positive reversal on Friday and it slipped slightly. The 20-day EMA held up but intermediate-term rising support line was broken in the process. The PMO indicator moved below its moving average for a second time in a couple of weeks, and those second crosses tend to mean something, although nothing seems to be able to shake this market of late.




The DWCPF (small caps / S-fund) found solid support at the 50-day EMA on Thursday so the bears had a chance but could not stop the bulls from pushing the index back into the megaphone formation.




The Dow Transportation Index has been lagging severely, and that tends to be a bad sign for stocks, although a similar underperformance over the summer did little to stop the bulls in the major indices. There is an open gap and the 200-day EMA below, and they may be the targets for this pullback.




The EAFE (I-fund) gapped lower on Thursday and that pushed it below one of the longer-term support lines. There is an open gap overhead, but it would have to get back above that old support line to fill it today.




The High Yield Corporate Bond Fund broke down last week and that could pose some problems for stocks, at last that is the tendency. The 200-day EMA was tested before the election in 2016 and that may be what's happening here. That would also test the bottom of the large (red) rising parallel trading channel.




The AGG (Bonds / F-fund) slipped sharply late last week and Friday's decline put it back below resistance and into the descending trading channel. Higher interest rates and lower bond prices make more sense for what the Fed is trying to do, but market forces are not always on the same page as the recent rally in bonds showed. Maybe it's back on track now.




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. We'll see you back here tomorrow.

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)