TSP Talk Blog

Stocks were up for the most part yesterday with varying degrees of results as the Dow added 29-points or 0.12%, and the S&P saw a similar percentage gain. The Nasdaq had a big day, as did small caps, which recouped Monday's losses. The Transports continue to lag and we're watching a similar pattern on the S&P being created right now.

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The S&P 500 was up about 2% in October and just 5 stocks of the 500 accounted for half of those gains. It's been a narrowing pocket of strength that has lifted this market recently, and that's not usually a good thing, but who knows how long it can go on?

Today should be a pretty important day as the Republicans in DC will be releasing their tax plan, or at least that is what is schedule. Some are indicating that it could be delayed, and that may be an issue in and of itself.

It is also the final day of the two day FOMC meeting and a policy statement will be announced sometime around 2 PM ET. There will be no press conference by Yellen so most are not expecting any changes in rates but as always, this could be a market mover if they change guidance.

We get the October jobs report on Friday and estimates are looking for a lofty gain of 300,000 jobs and an unemployment rate of 4.3%.

The SPY (S&P 500 / C-fund) was up slightly and while it is just slightly below all-time highs, there's a possible megaphone pattern being formed here near the top. One of the reasons I find this interesting is because we just saw this in the Dow Transportation Index a couple of weeks ago.




And since the Transports created its megaphone, it has struggled to get back to new highs and actually closed at a 5-week low yesterday after losing 0.45%.




The DWCPF (small caps / S-fund) remains in a sideways consolidation and this chart does not look bad. But the positive economic data recently surely will put pressure on the Fed to raise rates, and small cap stocks generally don't like when rates are rising.




The EAFE (I-fund) was flat, as was the dollar, and this chart looks fine here although the blue rising wedge may be indicating a possible bearish formation.




The CNN Fear & Greed Indicator has moved well off the highly extreme readings we were seeing a couple of weeks ago when it was in the mid-to-high 90's. 66 is on the greedy side but it is fairly neutral, which is surprising with how well stocks have been holding up. Of course 66 is twice as much as we saw before last year's Election and that's one of the reasons why stocks rallied afterward. Anyone who was thinking of selling probably did so by the election. There was few left to sell. When we hit 95+ in October, was that trying to tell us that there's few out there left to buy?




The AGG (Bonds / F-fund) was slightly lower as it nears the descending resistance line. The overhead October open gaps have been filled (although there is still one above in September) and the nearest gap now is on the downside created on Monday morning near 109.20. The Fed will have to power to fill that gap, or break it out above the descending channel. I can't see how they would talk about lower rates or even holding them for any length of time, so the upside for rates seems more likely, and that won't help the price of bonds.




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

Tom Crowley


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