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Tariffs are back!

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Stocks rolled over again on Thursday as the back and forth continues and the bull flag on the S&P 500 chart seems to be taking more shape. The Dow lost 252-points on the day, or 1.0%, while the broader indices held up moderately better. The charts show some interesting developments but unfortunately there's more pivot points rather than a clear direction.

Daily TSP Funds Return

The theme of the day on Thursday was Tariffs - and it was a surprise to the market to see tariffs imposed on our allies like Europe, Mexico, and Canada on steel and aluminum, so that put pressure on the larger U.S. industrial companies that do business abroad that deal with steel and aluminum. That's why the Dow was hit hard while the tech heavy Nasdaq fared better.

Of course the tariffs don't explain the continued weakness in financials as this chart is still flirting with the 2018 lows. There is a gap overhead but this feels heavy so could it be a precursor to the first sector to breakdown to new lows, or can the 200-day EMA hold yet again?




So we have some interesting charts like the bull flag on the S&P 500 (which is bullish for stocks) and a near breakdown in financials which could cause havoc. So, I suspect a big move is coming in one direction or the other and the key may be if financials find support and bounce off that 200-day average, which could allow the S&P to finally breakout to the upside. But if the financials start another leg down, all bets are off.

And another chart that looks looks similar to the financial is the Chinese Shanghai Composite Index. We've been checking on this periodically since a breakdown here could reverberate throughout the global markets. It saw the lowest close of the year on Wednesday but it bounced back above those lows on Thursday as it tried to fill an open gap.




We get the May Jobs Report this morning (Friday) 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%.




The S&P 500 / C-fund remains in a bull flag (blue) and it seems to be wanting to remain in the flag a bit longer. Any negatives from the jobs report could have it testing the bottom of the flag again, and as long as the flag holds, that could be a good place to buy, but of course there's no guarantee that the flag will hold.




The S-fund backed off from its double top after making a new intraday high on Wednesday. The rising wedge may be a problem should it break (blue dashed line) as they tend to do, and the red parallel channel could be a downside target if it does break. But a double top pullback is normal and not usually that severe.




The S-fund chart may even have just did a little tidying up as the decline on Thursday actually filled a tiny open gap near 1402.




The Dow Transportation Index is in a sort of "F" flag which can stay intact for quite some time, but when they break, as they tend to do, it is generally on the downside.




The EAFE / I-fund rallied early and tried to fill that large open gap, but by the close it gave up all of the early gains and ended the day back below the 200-day EMA.




The AGG (Bonds / F-fund) was down again so it is pulling back from the midweek highs. The opens gaps are still there for the taking so be careful in the short-term in bonds.




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. Have a great weekend!

Tom Crowley


Posted daily at www.tsptalk.com/comments.php


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