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China bond threat ignored

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Stocks opened sharply lower on Wednesday but it didn't take long for the dip buyers to show up as we saw another "multi-minute" pullback for stocks. By the close the Dow had lost 17-points, all but erasing an opening 128-point decline. We saw minor losses across the board in the U.S. indices, while bonds also erased early large losses.
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An opening scare for the bond market took stocks down early yesterday after China is reportedly considering slowing down their bond buying, or stopping altogether. We saw how much the dip buyers cared as the bull market shook off the news like water off a duck's back.

Other than that, not much was going on. Even the NAFTA story did little to affect stocks. Earnings will take center stage soon and all eyes will be on corporate guidance as companies tell the world how the tax cuts may impact their future earnings.

I'm going to make this quick today since, after the rebound, the indices were little changed.

The SPY (S&P 500 / C-fund) dipped but rebounded. A lower high and higher low was created so it didn't make a new intraday all-time high for the first time all year. While a move down to the bottom of the rising channel may be a minor opportunity for those on the sideline, the dip buyers didn't seem to want to give them that chance... yet, anyway.

The small caps / S-fund was in the same boat with the 2018 short-term higher high trend coming to an end, but there's certainly nothing bearish about this chart except that it may look too good and may be in need of a pullback.

The EAFE Index (I-fund) was helped again by another down day for the dollar so filling the gaps will have to continue to wait.

The High Yield Corporate Bond Fund was down again and it is now testing some fairly strong support near 87.20 where support lines and the 50-day EMA are meeting.

The AGG (bonds / F-fund) plunged at the open yesterday, breaking below the support line on the China news, but it rallied back after finding support at the 200-day EMA. It closed just below that support so we may have a test here, but after 7 days of downside action, a little relief may be due.

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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