TSP Talk Blog

Stocks were rocked on Thursday as investors gave way to the headlines that piled up on the day. The Dow lost 724-points, or 2.93%, on the day. We also saw 2% plus losses for most of the major indices. Are we heading for that test of the February lows?

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With the Fed and the interest rate hike behind us, and earnings season still two weeks away, investors focused on the headlines, of which there were plenty yesterday. One of President Trump's lawyers resigned after not being able to convince him not to testify in the Mueller investigation. That news sent in a wave of selling.

Facebook's privacy issues are having another day of impact on many popular social media stocks, plus any others that collect subscriber data.

Then we got some more details about the new tariffs and that actually gave stocks an initial little intraday boost, but warnings from abroad about the consequences of higher tariffs took its toll on investors as they don't seem to have the stomach for a potential trade war, so they just sort of threw their hands in the air and gave up. Trading volume wasn't high enough to call it a capitulation yet, so it seemed like the buying dried up rather than a panic sell-off.

Oh, did I mention the potential government shutdown?

There was a flight to safety as gold and bonds were up, and that pushed yields down so the financial stocks, particularly the banks, were hit hard. The Bank Index may be one of the first to test the February lows.



We were looking at 3% on the 10-Year Treasury Note a few days ago, and now it's back near 2.8%.

The S&P 500 / C-fund gapped down again leaving an unusual 4th open gap on the index's chart. It dipped below the early March low and may be heading for a test of the 200-day EMA and the February low. Thursday's close was the third lowest close of the year for the S&P.




The small caps / S-fund broke below that key 1360 area and may be heading toward the other rising support line near 1340. This one is a long way away from the February lows so a test of those lows would be pretty devastating. The question is, since the small caps are less impacted by the Trade War, can they avoid a test of the lows, even if the S&P does test its low?




The Dow Transportation Index fell back below the 50-day EMA and the rising support line. Technically, this is now a mess with the bearish flag breaking down.




The EAFE Index / I-fund tested the bottom of its bear flag and held so far... That's so far. Can it bounce here at support or will the weakness in the U.S. market late on Thursday push it to a breakdown? It too is an ugly chart but it could always bounce in the short-term and remain in the bear flag.




The High Yield Corporate Bond Fund closed below the 200-day EMA yesterday, which is a negative, but an argument can be made that this has formed a bull flag. The 85 area looks crucial.




The AGG (bonds / F-fund) rallied as investors took to safety yesterday for the first time in a while. The rally it had is not too surprising given the big positive reversal day it had on Wednesday at the prior lows, but being able to get back into the flag was a little surprising. That isn't a green light for bonds yet, but if it can move above the flag it would get interesting. Aggressive investors might want to take a shot at bonds here.

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Thanks for reading. Have a great weekend!

Tom Crowley


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