TSP Talk Blog

After a weak open that saw the Dow down nearly 200-points, stocks ended the day mixed again on Thursday. But taking the Dow, which was down 8-points, out of the equation, and it was fairly broad rally. There was a strong positive outside reversal day on the S&P 500 chart, but volume was quite light and that takes some of the thunder out of the reversal, plus it is still in the bear flag.

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Apple hit its $1 Trillion dollar market cap and that's grabbed the headlines on Thursday, but like a round number milestone on the Dow, it doesn't change percentage gains / losses. So, yeah, it's a big company... but yawn... did anybody not know that? The question is, now that it hit the number, will there be more willing to buy, or will folks be taking profits since it seemed to be pushed up there in the last week to get it over with.

There was a trend regarding the Fed and the day it updated its interest rate policy (Wednesday) while SPY, TLT, and GLD were all down at least 0.1% on the same day. According to sentimenTrader.com, "That has happened 9 other times on a day the FOMC announced its intentions, leading to a rebound in SPY over the next four days only 3 times. By 30 days later, though, it was higher all 9 times."

So, either the market will give back Thursday's gains over the next 2 trading days, or this one will go against the trend and the S&P will be higher three days afterward. Not a big sample size, so it is what it is.

I don't usually talk about the G-fund since it's fairly predictable, but just an FYI, the current annualized rate on the G-fund just hit 3.0% for the first time in a long while. It's been 10 years (2008) since the G-fund ended a year with a return of 3% or higher. By the way, that's also now the interest rate on TSP loans.

We get the July jobs report this morning and estimates are looking for a gain of about 190,000 - 200,000 jobs during the month, with an unemployment rate of 3.9%.

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The S&P 500 / C-fund was looking very bad on Thursday morning as we saw the bear flag break down and it fell below the 20-day EMA, but the lows were made just after the open and then everything turned. We saw moderate gains of 0.49% by the close but that was more than 1% above the opening lows. So, no sign of closing that gap yet and the positive outside reversal day looks good for some follow-through, but it was a very light trading volume day yesterday and we get the jobs report this morning so, you never know.




Here's a closer look to show the bear flag breakdown, which turned out to be a fake out and a positive outside reversal day. But the bear flag is still intact, I suppose. Often near these temporary lows we see several days of back and forth, like in late June and into July, before a break in one direction or the other, so it wouldn't be a big surprise to see some of yesterday's gains given back today, although an outside reversal day does have a good record of resuming in the direction of the reversal, so we'll see.




The small caps (S-fund) broke above its bear flag, something that is not typical but as we've said, we've seen a couple times already this year. That 50-day EMA seems to be holding firmly.




The Dow Transportation Index had a good day and also a positive reversal day, although not an outside reversal day like the S&P. Instead it just made a lower low and a lower high as it trades below the double top.




The EAFE Index (I-fund) gapped lower as the dollar rallied. The chart took some technical hits as it broke below both the 50 and 20-day EMAs. As we mentioned yesterday, this is acting like an index in a bear market.




The dollar gapped up helping to push the I-fund down and it remains in the rising channel.




The German DAX is now back below its 50 and 200-day EMAs, so there's trouble in Europe. Also, not shown, but China's Shanghai Index is down testing new lows as their economy continues to show signs of slowing down.




The AGG (Bonds / F-fund) posted a small gain and moved back above the 50-day EMA. I would suspect that the 200-day EMA could pose trouble for any rally in the short-term, unless there is some major economic news.




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Thanks for reading. Have a great weekend!

Tom Crowley


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