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Choppy, yet quiet day

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Stocks were relatively flat yesterday despite a lot of choppy action. The Dow lost 56-points on the day after being up 40 on Monday. Together with Monday's action the TSP stock funds were down for the two days, while the F-fund (bonds) was up on Tuesday erasing Monday's losses in the bond ETFs and giving it a slight gain after yields dipped slightly.

Daily TSP Funds Return

The concern on Wall Street now is inflation, and whether it is just a conclusion because yields and interest rates are rising, or if it's a real situation, I'm not sure. One of the first things I look at when inflation is in the air is whether gold, which has been beaten down for a long time, is starting to rally. So far there are no signs of buying in the gold market as it sits just off the August lows, but I guess you can say it stopped going down.

But it's bond yields that are stealing the headlines. They were down yesterday (bond prices up) but you can see the rate of incline in the 10-year Treasury Note has been quite sharp since the end of August, and that's the concern - the speed at which they are rising. Rising yields are giving investors another option - something they haven't had for a while. Getting 3.2% or more guaranteed may sound like a reasonable alternative to a stock market that has been getting a little flaky lately.

The S&P 500 / C-fund has been able to hold above some key support levels, similar to what we saw in late June. It chopped around for several days above support back then before staring another leg higher. That may turn out to be the case here as well, but of course nobody knows for sure. If that support breaks down, that would change things, and we could see some panic selling as stops get hit. At that point we would be due for some relief, but that could also start a new downtrend where caution would be more warranted, and selling rallies would be a better play then buying dips. But we're not there yet. Watch the 50-day EMA and the rising support line which is near 2875 right now.

The DWCPF (S-fund) was up early yesterday but relented as the bears won the battle again. The 200-day EMA is the key and that usually holds on the first test, which it has so far. But subsequent tests get more shaky. When investors and traders don't see a bounce off obvious support levels, they tend to join in on the selling.

The Dow Transportation Index took a large hit on Tuesday and the price of oil seems to be taking its toll on the airline stocks. This market leader has now closed below the 50-day EMA for a 3rd straight day.

The EAFE Index had a nice reversal off of early lows yesterday, as it neared the bottom of its channel.

The dollar was likely the culprit as it posted a negative outside reversal day, which may turn out to be a short-term peak. Perhaps the I-fund will get a couple of days of relief of off this, should it play out.

The German DAX shows the positive reversal at a critical low yesterday, which is why we may see at least a day of follow-through action on the upside, barring any negative news. Whether that rally can make it back up to the top of the range, I don't know, but maybe a move to the 50-day EMA would be reasonable being that it has done that a few times already.


The AGG (bonds / F-fund) was up slightly as the beaten down bond market looks for some short-term relief. The bonds look dangerous but short-term rallies may provide some alternatives to those sitting in the G-fund waiting for the stock market to stabilize.

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:

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

Tom Crowley

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SPY (C Fund) (delayed)

( Real-time)
DWCPF (S Fund) (delayed)

( Real-time)
EFA (I Fund) (delayed)

( Real-time)
AGG (F Fund) (delayed)

( Real-time)