TSP Talk Blog

Stocks had another volatile day Wednesday, as we might expect during an FOMC policy statement and Chair press conference. The policy statement announcement saw stocks rally, then fall into the close and the Dow gave back an early afternoon 250-point gain to close down 45-points. Most indices were down but small caps bucked that trend posting a solid gain.

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The Fed left the door open to a 4th rate hike this year, but made no commitments so we sort of ended the day where we started. That is, investors don't know anything more about whether there could be 3 or 4 rate hikes this year. But one thing was certain, we did get a 0.25% hike yesterday, and the yield on the 10-year Treasury Note, although volatile, closed above the bull flag we talked about yesterday.




Energy stocks rallied sharply, a sector that has been lagging this year, even with the price of oil at 6-week highs. Oil and gasoline inventories were down sharply helping the price of oil and gas, but for the first time in a while the stocks acted positively. I don't know if this is a trend change or if investors are now looking for a catalyst and value in a stock market that has been range bound for a several weeks, but it stalled at the 50-day EMA and it is still in a bear flag, so it may still be just temporary strength and investors may be taking some stabs in the dark looking for something worth buying when other things are not working.

The S&P 500 / C-fund had a volatile day of trading, which is not uncommon for an FOMC meeting day, but the bad news is it posted a negative reversal day and closed at the lows. It tried to fill in that small open gap near 2750, but couldn't quite get there. It closed below the 50-day EMA for a 3rd straight day.




The small caps / S-fund on the other hand, broke to the upside of what could have been defined as a bull flag, although the flag portion was rather steep making it less of a classic bull flag. It also closed off the highs making a somewhat negative reversal pattern.




The Dow Transportation Index peaked above the 50-day SMA (orange) once again, and again it failed to close above it. Now it made a negative reversal pattern so I suspect it will test the 50-fay EMA (purple) again soon.




The EAFE Index / I-fund was up on a sharp decline in the dollar. It may be trying to fill that open gap near 70.50 but the big picture is still the red bear flag, which is quite large.




The price of copper has been sliding again, and for the 2nd time in a year it is testing the 200-day EMA, which held last year. Copper can be a good gauge for economic strength so it would be a bit surprising if it did fail here.




The AGG (bonds / F-fund) had a wild day post-Fed and has created a positive reversal pattern, potentially big enough to be some sort of bottom - IF it wasn't breaking below that large bear flag. We'll have to see if the bottom of the flag will now act as resistance.

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

Tom Crowley


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