TSP Talk Blog

Stocks saw a healthy bounce on Thursday with gains across the board, both large and small cap, plus Transports and tech. It may have just been an oversold bounce after the recent dip, but it seemed like business as usual for the 2017 market. The Dow gained 71-points and small caps led on the upside.

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Bonds took a hit yesterday so, as you'll see in the AGG chart down below, the recent breakout was indeed a fake-out and there will be some attention on bonds, especially after next week's FOMC meeting. If we start seeing yields over 2.5% and closer to 3% on the 10-year Treasury, the stock market may finally have some competition as an investment option.

The House and Senate passed a two-week extension to fund the government avoiding a shutdown for now. The new deadline is December 22.

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

Next week is the FOMC meeting and the market is expecting a rate hike, but as always, it's the guidance for future action that investors are interested in and could be the market mover.


The SPY (S&P 500 / C-fund) posted a solid 0.32% gain on Thursday and it is now trying to recapture the breakout above the rising trading channel. The jobs report could be the catalyst to either push it above the channel or, if it is a disappointment, thwart another breakout attempt.




The small caps / S-fund, represented by this Wilshire 4500 chart (thanks Intrepid!) since we still have that strange one-day spike on the DWCPF chart, bounced back strongly yesterday after holding firmly at last week's lows and above the old breakout level. This looks pretty clean here and yesterday's low will be the key area of support for the small caps.




The Transportation Index resumed its bullish move after the two-day dip and now it looks like it is forming a bull flag. It may need a little more consolidation before it breakouts, and the bottom of the flag near the 10,100 area will be the levels to watch for any signs of trouble.




The EAFE Index (I-fund) has been the most interesting fund lately since its the only one that came down to test its 50-day EMA, but more so because of what we're seeing in the major overseas markets.




China is not a part of our I-fund but it is a clear catalyst for the other large Asian markets in the fund, like Japan and Hong Kong. After a big positive reversal to push it below and back above the 200-day EMA, the Shanghai Index closed back below that important technical level yesterday.




And London's FTSE is also currently below its 200-day EMA and it appears to be creating another large bear flag. There's been no big bounce yet like we saw in the September test of the 200 EMA.




The German DAX has also failed to bounce off of obvious support levels. This bear flag is getting a little long in the tooth and that could mean that the bulls are not willing to buy this pullback. A breakdown here could reverberate throughout Europe.




The AGG (Bonds / F-fund) pulled back fairly sharply confirming that Wednesday's move higher was a failed breakout. It found support at the 20-day EMA but failed breakouts on pennant-like formations tend to lead to breakdowns.




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Thanks for reading. Have a great weekend!

Tom Crowley


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