TSP Talk Blog

Stocks tried to follow-through on Monday's rally by opening strongly on Tuesday, but the rally started to fade by early afternoon, and a late push lower sent the Dow down 345-points by the close. The indices gave back a large portion, and in some cases all, of the gains made on Monday. The Nasdaq lagged and Nvidia, one of the recent market leaders, took a hit and that seemed to be the catalyst toward the close.

Daily TSP Funds Return More returns

Whether you want to call it the Tech Wreck, the Tariff Tantrum, the Facebook Flop, or whatever, it's sill the same. We had a correction, and the market tends to come back and test the lows. At this point it still feels technically "normal" and now we could see some churning near the lows before the market makes its next move, which would either be to form a bottom, or start a new leg down.

What we haven't seen, and what I expected on Monday morning, was a "whoosh" like sell-off on high volume to create a reversal day on either Monday afternoon or on Turnaround Tuesday. Instead, stocks rallied strongly right out of the gate on Monday morning, which was a little suspicious but clearly monumental in size, and Turnaround Tuesday turned out to be an about face Tuesday as it headed back toward the lows again.

Bonds finally rallied as we saw some flight to safety, but they hit some resistance and the rally could be short-live -- or they will finally breakout to the upside, which would be a bit of a surprise.

I've shown these charts several times (mostly to the TSP Talk Plus subscribers) that shows what happened during the prior 6 corrections going back to 2006. So, at the risk of redundancy, but still relevant, I give you the corrections: Notice that some of the lows took days if not weeks of choppiness before they started to rally again, particularly in the four lower examples...






Friday is Good Friday and that means the markets will be closed and the TSP will not process transactions (IFT's or otherwise) that day. Per tsp.gov, "Transactions that would have been processed Friday night (March 30) will be processed Monday night (April 2), at Monday's closing share prices."

Having the final day of the 1st quarter end with a holiday makes it a little different than normal, so we'll see if we get any surprises.

The S&P 500 / C-fund gave back a large chunk of Monday's gains and as we talked about yesterday, there could still be some kind of bear flag forming off the recent low, but that could take time to develop. Another option is we could see a battle between investors who are afraid of a breakdown, vs. those who are afraid of missing out on another explosive rally, and that could account for some choppiness. That's actually a similar option since choppy action near the lows can create a bear flag. So there's dangers out there, but there's also a lot of support.




The weekly chart is still testing and holding at the long-term rising support line and the 50-week moving average.




The small caps / S-fund also gave back most of its Monday gains with the 1.9% loss. This has held up better than the large caps since it is well off the February lows and it still has not reached the early March lows. The problem is, if it does test the February lows, it's a long way down.




The EAFE Index / I-fund faired somewhat better, mostly because most of the damage done in the U.S. market was made after the European markets had already closed.




The High Yield Corporate Bond Fund may have posted a positive divergence in that it held up fairly well given what the start market did. It's still below the 200-day EMA but it remains in the middle of its channel, rather than testing the lows like the stock indices.




The AGG (bonds / F-fund) rallied up to the 50-day EM for the first time in a while, and back to the top of the flag, before stalling. Interesting situation. It looks bearish for bonds but if it can crack the resistance, it may be trying to put in a bottom.



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

Tom Crowley


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