TSP Talk Blog

Stocks rallied again to start the new week, making it three straight positive days for the indices. The Dow gained 89-points and again we saw gains of up to 0.4% in the major indices. The Transports had a big day, as did the I-fund, with the help of another dip in the dollar.

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It was a very light volume trading day and it brings back the old adage about not shorting (betting against) stocks in a dull market. Of course we haven't been in a dull market too much this summer as we saw a couple of mini shakeups and some higher volatility earlier this month, but over the last three days it seems the bears have gone on vacation. Historically this week starts to get a little more dicey for stocks, but those bears may have to get back to work if that is going to happen.

As if on queue after what we talked about in Monday's commentary, late in the trading session yesterday it was reported that President Trump, in an interview with Reuters, again got on the Fed for continuing to raise rates in the face of his efforts to heat up the economy. There was a little dip in stocks toward the close on the news, but it was likely traders because that sentiment is not a bearish one for stocks, as we talked about. The stock market would prefer the Fed stopped raising rates.

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The S&P 500 / C-fund inched up again gaining 0.24% on Monday, but those small gains add up when they come one after another. The problem is, stocks tend to move down more quickly when they do fall, and those small gains can be taken away so I would suggest remaining nimble, and not getting complacent during this time of the year.




The small caps (S-fund) closed at a new high so for the first time in a while it not only made a new high, but held in new high territory into the close. It wasn't a major breakout since it is still very close to that resistance line, so we'll give it a few days to confirm this. The chart formation is a good one, as we've been saying, but we have wondered why it wasn't breaking out and was failing to do so several times this summer. So, I have been suspicious despite the good chart. By the way, if Trump does sway the Fed to slow down the rate hikes it would likely be the small caps that benefit most.




The Dow Transportation Index had a big day and the upside continued with some authority. It broke above the top of that large trading channel that we talked about yesterday, and now the January highs should be tested soon. That, of course, brings with it the possibility of a double top pullback. It has come a long way since the start of last month.




The EAFE (I-fund) had a good day and seems to have its eye on filling those open gaps. That's two down and one to go, but after that, the bear market chart could give it another dose of trouble as it reaches up toward the 20, 50, and 200-day EMAs.




The dollar is pulling back and trying to fill its open gap so this has been a nice rebound for the I-fund and needed dip for the dollar, but so far it's just some backing and filling for the gaps on those charts. I suspect the larger trends will resume in these charts shortly after those gaps are filled.




The AGG (bonds) broke above yet another level of resistance as the strength in bonds continues to baffle the higher interest rate environment. Normally yield rise and bond prices fall when interest rates are rising so something is going on here. Maybe President Trump's complaining about higher rates is telling bond investors to stop betting on higher yields?




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

Tom Crowley


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