TSP Talk Blog

Stocks came back to life on a Turnaround Tuesday after the Dow and S&P 500 had been down for four straight days. The Dow gained 112-points on the day and the broader market indices, particularly the small caps, performed even better. There are still a couple of issues that could get in the way in the short-term, but it was a good day for stocks.

Daily TSP Funds Return More returns

There was a bounce back in the Turkish lira so apparently the two day sell-off based on the action in Turkey was an overreaction. That may be the case, but the problems in Turkey are still real so a little follow-through hangover is possible if the headlines pop up again. It doesn't look like the inflation problem is going to get any better any time soon there.




The trading volume continues to be very light so as we've been talking about, the indices can get pushed around rather easily, and that goes for both the down and the upside. It's August and trading can be tough as the waters get choppy so don't be too surprised if we see things fall right back down before the end of the week.

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The S&P 500 / C-fund rallied impressively although volume remains very light so there's not a ton of conviction, nor is the big money involved, so up or down, it's tough to trust any big move. You can see that the upside gap is still open and that's always a lure, but we've also seen these consolidations last longer than just 3 days in the past so is this one over yet?




A look back a little further shows these consolidation lows are getting smaller and smaller, and the rallies out of them have been getting smaller too. This has probably been a product of volatility shrinking significantly since the market lows earlier in the year, and perhaps it has gone full circle?




The small caps (S-fund) were one of the leaders yesterday and it has been quite amazing to watch this hang around those old highs without breaking above it. I'd say that it would be a surprise if it didn't breakout from action like this, but what has kept it back during the several prior failed attempts?




The Dow Transportation Index also had a big day yesterday although there was a bit of a negative reversal created after it filled the open gap and pulled back below that rising support line.




The EAFE (I-fund) is just having a rough time of it with the dollar being so strong. It is flirting with a breakdown, but it could also be oversold and we could see an oversold bounce at this double bottom. That would be a gamble and probably a short-term endeavor, but even if it just filled those open gaps, it would be a decent gain. But if the dollar keeps rallying, all bets are off.




The dollar spiked up again yesterday causing commodities like oil, gold, and copper to drop again, as well as our I-fund.




The price of oil tried to rally on Tuesday but it is having a difficult time getting back above the 50-day EMA. Whether this weakness is just a result of the dollar's strength, or if it's something else as well, I don't know, but the head and shoulder patterns makes me think it is going to continue lower.




The AGG (bonds / F-fund) gave back yesterday's gains as it remains within that cup and handle formation.




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

Tom Crowley


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