TSP Talk Blog

Stocks opened higher on Wednesday and, as if Tuesday's political mayhem in Europe never happened, they climbed throughout the day gaining back all of the losses from the day before. The Dow gained 306-points with the S&P and Nasdaq basically reversing Tuesday's losses. Small caps led, and I-fund was up while the dollar pulled back sharply.

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The market has been in a fairly tight range of late, and a wide range in the intermediate-term, and the big downward move on Tuesday made it appear that it was ready to break down from that smaller range, but Wednesday came and here we are back in it again.

One thing I wish I had mentioned in Wednesday's commentary was something that we talked about last week when we had a Monday morning emotional gap up. I had suggested that emotional Monday morning gaps tend to get filled quickly during the week. So, Tuesday's post holiday gap down should have been no different, and an emotional open gap got filled quickly yet again.

Most stocks as well as oil, the dollar, bonds, etc. basically reversed all of the moves from Tuesday. One exception was the bank stocks which rallied, but did not bounce back like the rest of the market - percentage-wise, so there was some selective buying.

The 1st quarter GDP came in slightly lighter than expected at 2.2% with the estimate looking for 2.3%.

The Memorial day seasonality chart got it right, although the magnitude of the moves was obviously extreme than average. The next two days have even better records, but Tuesday and Wednesday may have stolen their thunder.


Chart provided courtesy of www.sentimentrader.com

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The S&P 500 / C-fund threw us a curve this week. Just when we though the bull flag and the consolidating range was breaking down, the market snapped back and filled Tuesday's small open gap. So, the scenario and momentum are back in the bulls' court as we have another bull flag within the larger bear flag.




The Financial Sector ETF did not fill its open gap and lagged on the day as yields did not rally percentage-wise to the same degree as stocks. Gaps tend to get filled so it would not be a surprise to see it filled this week, but keep an eye on this chart since it is the one still flirting with its 2018 lows.




The S-fund blasted into new high territory before pulling back slightly by the close. This could be considered a double top here although the prior peaks could be considered tests of the old highs as well. Either way, the 1410 and 1420 area are the resistance levels to watch.




The EAFE / I-fund was up but you can see the enthusiasm was not in the EAFE as much as the U.S. indices.




The dollar gave back all of Tuesday's gains and is now testing the bottom of that narrow rising trading channel.




The AGG (Bonds / F-fund) was down after four consecutive gap up big rallies. It's back below the 200-day EMA with those four open gaps there to be fill, should it choose.




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

Tom Crowley


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