TSP Talk Blog

Stocks followed through on Wednesday's positive reversal day by tacking on another day of solid gains on Thursday. The Dow led the way with a gain of 241-points, or about 1%. The broader indices were up solidly, but but not to the extent as the Dow.

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The dollar gapped up higher yesterday and that put a little added pressure on the I-fund. Small caps were up but they are now testing resistance at their 50-day EMA, as is the Transportation Index, which is in a bear flag, so it's still questionable out there despite the big recent gains.

I am going to make this brief today since we get the March Jobs Report this morning (Friday) and we know the prior reports have been big market movers so I don't want to pretend to know how it will go. Estimates are looking for a gain of 175,000 jobs and an unemployment rate of 4.0%. How close it comes to the estimates is important but the key number to look for will be the wage growth figures and how the bond market reacts to any potential inflationary concerns.

Update: Jobs report actual numbers: +103,00 and unemployment 4.1%. Wage growth 0.3%.

The charts try to tell us the story but in the short-term the emotional aspects plays a part. Remember last month when stocks basted off after the jobs report was released on March 9? That was followed by a big reversal and we not only saw those gains disappear, but the start of the test of the February lows began a day or two later.



Moral, don't be too enamored with the market's initial reaction to the jobs report because the gains or losses could be fleeting.

But before we get the jobs report, another wave of Trade War Talk after President Donald Trump said on Thursday evening that he has instructed the United States Trade Representative to consider $100 billion in additional tariffs against China.  The overnight futures are dumping. Are we having fun yet?

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The S&P 500 / C-fund broke above some key resistance yesterday, which is a good sign, but it is still below the 50-day EMA which can be a stubborn area to cross. We'll see if the jobs report can help the S&P jump above the 50-EMA, or if it turns out to be resistance. Other than that, the bear flags are still there, but the positive reversal on Wednesday made for a possible bottom.




The small caps / S-fund hit the 50-day EMA and stopped, so once again we'll look to the reaction to the jobs report for a potential resolution.




The High Yield Corporate Bond Fund broke above its small bull flag on Wednesday, and then on Thursday the large one has somewhat broken out. It did close near the lows of the day so that's a possible negative reversal day, but it is back above the 50-day EMA and the flag, so that could help as support.




The AGG (bonds / F-fund) fell back into the flag and below the 50-day EMA again. The jobs report will likely have a big impact here, but the action on Thursday was bearish for bonds.

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Thanks for reading. Have a great weekend!

Tom Crowley


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