TSP Talk Blog

We saw some of volatility kick in on Friday but the market dodged what looked like was going to be an old fashioned drubbing. We know how this year has gone for stocks - pullbacks and sell-offs haven't lasted weeks or days. They can now be measured with a stop watch. The Dow closed down 41-points so it got back nearly all of the earlier 350-point loss we saw after a 400-point - high to low - decline that started at about 11 AM ET.

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At this point anything that could get in the way of the tax cuts may trigger some runs for the exit, and on Friday the ABC news report that General Michael Flynn was prepared to testify that Donald Trump, as a candidate for president, told him to contact Russians, was one of those triggers.

It turned out to be erroneous and later ABC corrected the report that it was after Trump was already elected and not before the election. So, stocks snapped back on that, and later on Friday night, after the market closed, the Senate passed its tax plan.

Not surprisingly, the futures are opening up strongly on that news (S&P is up 17, Nasdaq 40+ as i write this about 6 PM ET), but be careful. When investors see how quickly stocks can turn on them, like they did on Friday morning, they can be more quick to take profits to protect gains. I wouldn't be too surprised see that happen by Monday morning - barring any other big news events.

The tax cuts are not law yet, but we're another step closer. But stocks will continue to hang on any news that could get in the way of that happening, and Friday's crazy early action was an example.

The November jobs report will be released this Friday morning and consensus estimates are looking for a gain of 190,000 jobs and an unemployment rate of 4.1%.


The SPY (S&P 500 / C-fund) had a wild positive reversal day on Friday but still closed with a modest loss. The bulls are not giving up yet, particularly with those tax cuts getting closer, but technically we can see that the chart is testing the upper end of its trading channel.




We can see that even better on the weekly chart as last week's weekly bar hit the top of its two-tear channel.




The DWCPF (small caps / S-fund) was getting hit very hard during the panic sell-off but notice where it found support... At the top of the old resistance level after filling that open gap from mid-November.




The Dow Transportation Index broke out last week with a furious 3-day rally before pulling back on Friday, but closing well off the lows like the rest of the market. This is such a big move for the Transports, the market leader, and it could be very meaningful for the overall market in the intermediate-term, but it doesn't mean there won't be profit taking or consolidation in the short-term since the gains came so quickly.




The EAFE Index (I-fund) was down and there seems to be something happening overseas as we're seeing some charts starting to breakdown in Europe. Japan is still doing very well.




Here's what's been happening with the two main I-fund markets in Europe, the German DAX and London FTSE. Both have broken down from bear flags and flirting with major moving average breakdowns.




The AGG (Bonds / F-fund) also spiked on Friday on the Flynn news, but in the opposite direction, and settled down as stocks rebounded. It remains in that large wedge formation with false breakouts on each side now. Bonds should not be rallying if the Fed is serious about raising rates, but they will go up as a safety play when stocks are getting hit - as we saw on Friday.




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

Tom Crowley


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