TSP Talk Blog

Stocks opened the new week with an explosive rally - something that we don't normally see after a Friday like we had with the indices closing on the lows. The Dow jumped 669-points and the oversold indices gained 2% to 3% on the day. The question going forward of course is, does the recent test of the lows mark the low for this correction?

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So much for "Markets don't bottom on Friday." I fully expected more downside action to start the week with some kind of reversal after a nervous sell-off. So far that's not the case. It could still happen, but as I mentioned yesterday, I think the tariff talk was overblown and over the weekend Secretary of the Treasury Steven Mnuchin eased those fears in an interviewed, plus the "Stormy" interview didn't pack as much of a punch as was hyped, or at least Wall Street didn't seem to think so.

The market was in need of a test of the lows, and what we saw last week qualifies, even though we didn't touch the intraday February low. We did hit the February closing low on Friday.

That said, volatility is still elevated and investors are still on edge so there's no guarantees that it is smooth sailing from here, but so far so good for the bulls.

Friday is Good Friday and that means the markets will be closed. I don't see that posted on the TSP website yet so at this point I am just assuming that the TSP will not process transactions. Hopefully the TSP will confirm this soon.

The S&P 500 / C-fund hit a text book support level in the 200-day SMA at Friday's close, then rebounded on Monday. Looking back it looks like an obvious of a place to see some buying, but of course when stocks are plummeting, we always assume the worst. There is an open gap near 2710 still, and while everything looks rosy after a day like yesterday, there's always a chance that this rally is just the start of another bear flag. The indices had become so oversold that the rally isn't all that surprising, but now the question is, have we seen a successful test of the lows and are we off to the races again? But make no mistake about... a rally from where Monday's rally started, looks to be impressive.




As for volatility and multiple 2% moves.. From sentimenTrader.com.

Chart provided courtesy of www.sentimentrader.com

It's not always straight up, but the averages look good for the short-term. 2008 was the anomaly on the downside and of course that was a bear market. After a month however, things became more dicey.


The small caps / S-fund rallied over 2% yesterday along with the large caps and that basically got back Friday's losses, nothing more. It's certainly a good start and a low would look a lot like this if it turns out to be the low, but there's still a lot of overhead resistance so it may not be as easy as all that. There was some technical damage done. Watch that 1380 area on any further upside.




The Dow Transportation Index rallied 2%, but in comparison to recent action, it's not that impressive of a move yet. A rally above the 50-day EMA will be a more technically bullish sign, but yesterday was a start.




The EAFE Index / I-fund remains below its bear flag and that's a little concerning - unless Europe hasn't reacted to the U.S. rally yet. We'll find out today.




We may see this move higher after Europe sees how the U.S. markets closed on Monday, but this chart German DAX still has some issues and any upside could just be a bounce off the bottom of its bearish looking flag formation.




The High Yield Corporate Bond Fund rallied 0.65%, and created a positive reversal day like many charts, but it only made to the 200-day EMA so it will start Tuesday under some technical pressure. If it can manage a move above the 200-day EMA, then the 85.75 area looks to be the next test.




The AGG (bonds / F-fund) was rather flat again as neither sharp market declines or rallies seem to be having much of an affect.

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

Tom Crowley

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