TSP Talk Blog

Stocks opened mixed on Tuesday and the major indices ended the day almost perfectly flat after some geopolitical and oil related intraday swings. The Dow added 3-points but came back from a 158-point loss just an hour or so before the close. The Dow was up 55-points at the highs, and as you will see on the S&P 500 chart down below, there was some resistance in that area. Small caps continue to dominate the large.

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As expected, President Trump withdrew the U.S. from the Iran nuclear deal, and there was some back and forth after the announcement, but as we saw, the market shrugged off the news by the close. There are some reports of an air strike on the Iranian military base in Syria so there may be some ramifications to this and we'll have to see how the market digests the info.

Just a quick report today because of how flat the indices ended up. It just feels like the indices are a little heavy but the bears don't seem to have the fortitude to keep pushing lower, so the bulls may just step in if the bears are unwilling.

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The S&P 500 / C-fund posted its second reversal day in a row. Monday's was negative, and Tuesday's was positive. That means we might expect some upside follow-through today, but that may take some extra effort because the S&P is sitting just below the 50-day Exponential (purple) and Simple (orange) moving averages. Plus there is a descending resistance line off of the two most recent peaks so getting and closing above about 2680 will be a tough job for the bulls, despite the positive short-term setup from yesterday's reversal.




The small caps / S-fund rallied again but you can see that it stalled for a second day at the resistance line. It is outperforming the large caps but I'll remind us of that bearish looking head and shoulders pattern that continues to be formed. This may be a test of the head, which could reach up to 1400 if successful, but that would be more resistance.




Example of a head and shoulders pattern head test:



The Dow Transportation Index had a good day but it too failed to breakout after an early attempt. It closed below the 50-day EMA again so the bulls have their line in the sand they need to cross.




The EAFE / I-fund continues to hold above its 50-day EMA and there was some sign of life here as the bull flag has been broken on the upside, albeit slightly. The I-fund share price was negative because of some negative fair value needed to adjust Monday's inflated price.




The AGG (Bonds / F-fund) broke down from the bear flag, as bears flags tend to do. Still a bearish scenario, but sentiment on bonds is so negative that a relief rally may not be far off. I'm not calling for any big rally because of how ugly the chart look, but I'm just saying the downside may be overdone in the short-term.




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

Tom Crowley


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