TSP Talk Blog

It was another range-bound, whipsaw kind of day as stocks rallied early, then gave back those gains and only a late tick higher kept the big three indices from closing negative on the day. The Dow closed almost 400-points off the morning highs, but did manage to stay green. Once again the early rally helped the overseas markets, which close during our morning hours, stay positive for the day, which allowed the I-fund to lead on Thursday. Bonds were down sharply as yields moved higher after the CPI report came out, which actually came in a little cooler than expected, but maybe investors were expecting something even cooler?

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The CPI and Core CPI reports came in at +3.2% and +4.7% year over year respectively. Both a little better than expected, but perhaps not good enough to keep profit takers from selling the big early rally in this range bound market.

The Yield on the 10-year Treasury and the dollar were both down early, but a positive outside reversal rally filled Monday's open gap, and that reversed the morning rally in stocks as well. Now that the gap is filled, we can only wait to see which way this morning's Producer Price Index will push it.



The dollar closed above the resistance line that had given it some trouble recently. It's looking more like an inverted head and shoulders pattern so maybe a right shoulder needs to be formed before any major breakout?

The weekly S&P 500 chart shows that the the recent pullback is testing the bottom of the long-term rising trading channel. That makes today's trading quite interesting, being the last day of the week. It could make or break the trend.




The Nasdaq 100, which is the largest 100 tech stocks on the Nasdaq, has pulled back close to its 50-day EMA - something it has flirted with a few times this year. It held in April and, other than two trading days in March, it has held on a closing basis since it moved back above it in early January.



Nvidia reports earnings in a couple of weeks and it seems to be dragging and pulling the Nasdaq along with it as it is also testing its 50-day EMA right now, heading into those earnings. The open gap looks ominous so the 50-day EMA support is critical.

A few of the other major tech stocks are mixed in regard to their 50-day EMAs. Amazon and Google (aka Alphabet) recently bounced cleanly off their 50-day EMAs after reporting earnings...




On the other hand, behemoths Apple and Microsoft failed to hold at their 50-day moving averages.




Two weeks is a long time to wait, but perhaps Nvidia is going to be the deciding factor after the bell on August 23rd when they report. New bull markets bring new leaders and Nvidia has certainly been a leader, but their guidance last quarter was so strong that it may be a tough earnings number to hit.

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The S&P 500 (C-fund) continues to trade in a range but it seems to be reluctant to fill the open gap below near 4440. Both the bulls and the bears may want to see that filled, but for different reasons. There's an open gap up near 4560 as well and, even if we are seeing a top being formed, it wouldn't surprise me to get a spike up to fill that gap before the market rolled over again. I'm not saying this is a top, but rather that both gaps could get filled regardless of what eventually happens - new highs or an eventual breakdown.




DWCPF (S-fund) struggled and lagged again on Thursday and it continues to flirt with very important support area where the 50-day EMA is meeting with the old breakout area near 1785.




EFA (I-fund) was up very big in early trading - enough to fill that large open gap by 73.40, but it flipped over when the dollar reversed higher. It did close nicely positive for the day and moved back above the 50-day EMA, but it was a negative reversal day. If the 50-day EMA can hold, the higher low would remain intact.




BND (Bonds / F-fund) fell sharply on Thursday, filled one open gaps, and is now starring at the second open gap near 71.20. It's back below the 200-day MA and remains in a descending channel. This looks questionable but it is basically in a two and a half month long consolidation between 71.00 and about 72.80.




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Thanks so much for reading! Have a great weekend!

Tom Crowley




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