TSP Talk Blog

The new holiday shortened week started with a thud as political turmoil in Italy and Spain helped bring down global markets. The Dow lost 392-points or 1.58%, while the broader indices lost ground but not to the same extent. The small caps held up well while the International stocks were beaten down with another spike in the dollar.

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The intraday pattern has been fairly consistent lately with the daily highs being printed near the morning's open, then a slide into the late afternoon where we then get a little bounce. The Dow had been off 505-points at the lows before that last hour rally so it could have been worse.

Oil was down again but nothing like on Friday, but instead it was bond yields that tanked while bond prices rallied again. The 10-year Treasury Yield fell all the way below 2.77% - a free fall from the May highs above 3.1%.




This caused the financial stocks to tumble pretty hard on the day, and the sector is now flirting with the 2018 lows again, as you'll see in the charts section below. A breakdown there would likely reverberate throughout the market.

No one is really expecting a repeat of the 2011 - 2012 European financial crisis but this political turmoil in Italy and Spain sent their markets reeling yesterday because of concerns of those countries potentially leaving the European Union.

This morning we will get the second estimate of the 1st quarter GDP and the estimate is for 2.3% growth.

On Friday we get the May Jobs Report and estimates are looking for a gain of 177,000 jobs and an unemployment rate of 3.9%. The average hourly wage, which has become a hot topic because of inflation concerns, is expected to have risen by 0.3%.

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The S&P 500 / C-fund had that small bull flag (green) developing and it was one of the bright spots for the S&P but there was also the looming large bear flag (red) that was weighing on the market. The bulls were given opportunities to break that bull flag to the upside, but they may have waited too long. Now the bears are in charge, at least while the index trades below the 50-day EMA and below that bull flag.




The Financial Sector ETF is once again testing the February lows. This makes test number four and I think that is flirting with danger. As they say, if you keep knocking on the door, eventually someone is going to open it.




The S-fund held up rather well considering the Dow was down over 500-points at one point yesterday. The 0.35% decline is just a mediocre loss that could have happened on any day, so the small caps seem to be dodging the bullets of this European political mess so far.




The EAFE / I-fund had a bad day as obviously the trouble was over in Europe and of course the rallying dollar / falling euro, did not help.




The dollar made another higher high ...




The High Yield Corporate Bond Fund shows some potential issues with the credit market as it broke down from a double bear flag and fell below the 50-day EMA yesterday.




The AGG (Bonds / F-fund) rallied hard yesterday hitting the highest level since early February. It closed above the 200-day EMA but closed at some potential resistance. It's been quite a run for bonds over the last week.




Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php

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

Tom Crowley



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