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TSP Talk Market Commentary 03/26/2020

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Nothing like a little politics to kill a rally. The Dow was up over 1300-points at its high yesterday before very late announcement that the stimulus package was being held up by a few senators. The Dow ended the day up an impressive 496-points, or +2.39%, but stocks went out with a thud with the Nasdaq actually closing in the red.

Daily TSP Funds Return

Wednesday's rally, which lasted most of the day, was impressive considering it was following the largest one-day gain for some of the major indices on Tuesday. But once investors, traders, and program trading got word that there was a holdup in congress, the switch flipped and now the the relief rally could be in jeopardy.

We were on the verge of back to back 90% up volume days on the NYSE, which is called a "buying thrust", and getting two of them this close together would have been a major green light to many investors, but that last half hour killed it. Suspicious? It did close at 81%, which is still impressive, but traders look for those 90% plus days.

Not many people were expecting stocks to reverse up and just keep rallying, but the breaks were put on this one, although we did manage to see the Dow and S&P 500 put together back to back wins for the first time since February 5th and February 12th respectively.

Normally I'd say that stocks do eventually go were they were planning on going, and temporary blips only slow the process, but we're talking trillions of dollars at stake and I don't know if investors trust that the folks in Washington can pull this off.

The impending economic data that has been impacted by the coronavirus will start coming out today and we have to look out for a couple of things as market timers. The data will be bad, but so are expectations and the market could actually rally if the data is terrible, but not as bad as expected. Also, fear mongering is still out there for a variety of reasons, and that keeps investor sentiment on the bearish side. What we need to see now is whether investors can see through the weak data, which we know will be bad, and determine if the 30 - 40% haircut that the stock market had already taken, has priced in what we're about to see in the economic reports.

With volatility still extremely high, even on big positive days, talk becomes cheap, so l
et's go over the charts quickly.

The S&P 500 (C-fund) had another big day going for it on Wednesday but settled for a 1% gain by the close. The descending resistance line is still broken so there is room for it to roam, unlike the last several weeks when it was remaining within that channel, but the questions that remain are, will we test the lows again, and even if we do, is there more rally left first?

The DWCPF (S-fund) was having an even bigger day than the S&P 500 with a gain of 7% at the highs, but the S-fund had to settle for a smaller, but still impressive, 2.8% gain. That could be a bear flag forming so it's not out of the woods yet.

The EFA (I-fund) held onto a nice gain because of the late selling in U.S. stocks, so the TSP may make some adjustments with today's price. That bearish looking flag coming off the lows may actually be getting too steep to call it a flag. It could be trying to reach up to fill that open gap.

The dollar was down again and it looks like that 28 area is key for now. Stocks seemed to stabilize once the dollar peaked, so keep an eye on that 28 area.

The AGG (bonds / F-fund) rallied impressively again making it five straight large up days for the normally tepid moving AGG.

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

Tom Crowley

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DWCPF (S Fund) (delayed)

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AGG (F Fund) (delayed)

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