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TSP Talk: A breakout - but weak close

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Stocks opened higher on Tuesday but after a few breakouts to higher highs in some indices, we saw some fading into the close. The high flying Nasdaq did pullback but investors seemed to put that money into other indices, rather than selling outright. The Dow had a good day adding 160-points, but it was up over 300 in early trading, so it wasn't the best action. Small caps made a higher high yesterday, but also came well off the morning highs.

Daily TSP Funds Return
We seem to see pockets of weakness and pockets of strength shifting daily between the indices as investors are shuffling money around rather than doing much overall selling. This latter half of July tends to see a lull in stock prices as we get a "sell the news" reaction to earnings announcements but this year the fear of missing out (FOMO) on any vaccine and / or stimulus packages being announced may be keeping the money in the market.

We talked yesterday about the indices doing well but the internal numbers showing weakness. Yesterday was a flip flop of that as the indices did just OK by the close, but the internal numbers were quite strong.

Plus the S&P 500 Equal Weight Index saw a 1% gain while the S&P 500 was up just 0.17%. So if you're looking at the market from the glass half full view, there you go. If you're a glass half empty type of investor you might see how much the broader market has lagged as this chart remains well off the June highs, where the S&P 500 has already made a higher high.

Earnings were decent after hours but an initial pop in the futures after the bell faded toward breakeven when trading resumed after the 15 minute break between 4:15 - 4:30 ET.

The S&P 500 (C-fund) took another step higher above the resistance line, and basically the weak close just filled the open gap from Tuesday's opening. It looks like 3210 - 3235 are the new support levels, and if they break then we could see a "real" pullback and not one of those 2 day dips. Until then, the dip buyers remain in control.

The DWCPF (S-fund) broke out above the June high yesterday, but the late pullback to fill the open gap created by the opening rally took it back below that June high. I wouldn't call it a failed breakout yet, but it needs to follow through on the upside to cement in the breakout. It has had a nice run since this leg higher started on June 29, but it also had a nice consolidation period since. There's a large open gap below 1450 and that would be one short-term concern.

The EFA (I-fund) moved above the June high yesterday, and despite closing near the lows of the day, managed to close above that old resistance line.

The dollar fell sharply yesterday helping out the I-fund, but the decline was quite serious as it broke below the prior lows.

The price of Oil got a boost from that weak dollar, and closed back above the 200-day EMA for the first time since January. That's meaningful, if it can hold a few days.

BND (bond ETF) posted another small gain as it continues to climb that bullish staircase. The gains aren't huge, but it is beating the do nothing G-fund by quite a bit if you weren't in stocks. The question is, how long can this narrow rising trend last?

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

Tom Crowley

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  1. Bullitt's Avatar
    Didn't realize EFA managed to break higher yesterday too.

    From Argus Research

    The S&P 500 has seen a mild breakout above the June 8 high of 3,232. The index had been trapped in a sideways base for about six weeks. The recent market pause worked off a mildly overbought condition on the daily chart. At the June 11 closing low, or the low for the consolidation, the “500” had given up 7.1% -- which is a very normal and healthy pullback during an uptrend.

    With the breakout, it’s possible the index runs back to its all-time high (ATH) of 3,386 from February 19. We think a larger pullback is coming, but are not sure whether it will be after the “500” takes a run at its old high. Sentiment is certainly suggesting a pullback in the not-too-distant future, but price is the final arbiter.

S&P500 (C Fund) (delayed)

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

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

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

( Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes