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Testing Monday's lows

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The selling continued on Thursday with more deep losses and once again I'll say this seems to be the price the market is paying for 15 months without pullbacks and corrections, and it is now officially a correction (-10%). They happen, and many expected it, but when it comes it is still a shock to the psyche. Support levels were thin and that created a vacuum on the down side so two plus months of gains were erased in a few days. The Dow lost another 1033-points or 4.2%.

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The market certainly overshot on the upside, and now it will likely overshoot on the down side. This has been the 4th fastest 10% correction for the S&P 500. The snap back rallies will likely be explosive when they come, but the character of this market has changed so selling rallies may be as important as buying dip (dips may be an understatement right now) because we don't know where the bottom will be. Look for this to last weeks rather than days, and at this point the major indices will be looking for the 200-day EMA to help stabilize them.

We're not stock pickers here but this may be a good time to look up your favorite stocks to see what kind of bargains are out there. Many had been going up so fast that they were untouchable, but that should be changing for some.

The potential for another government shutdown is still out there, and that may not be helping the situation, but that's not the major concern for investors right now. It's all about emotion, risk tolerances, and taking advantage of opportunities, whether rallies or sell offs, until this passes.

Enjoy your weekend and forget about the market for a few days. The chaos will be waiting for you on Monday.

The SPY (S&P 500 / C-fund) closed at a lower low Thursday but it is still above its 200-day EMA. I can't imagine that a decline like this would come this far without testing that 200-day EMA before it's over. The losses have now basically taken away the gains going back to mid-November.

The small caps / S-fund are making a second test of the 200-day EMA. This index isn't always as "clean" as the S&P 500 since it is not as highly traded. That means there's a greater chance of it falling through the 200-day EMA -- without calling it a major breakdown.

The EAFE Index / I-fund was down and the dollar was flat but the I-fund may have needed to catch up / pay back on Thursday for Wednesday's fairly favorable price, which was why the loss was greater than we see here.

The High Yield Corporate Bonds did break down below its 200-day EMA and it is now testing the November low that it made.

The AGG (bonds / F-fund) was down again making new multi-year lows. It's the same story so bonds have yet to become the safe haven and are instead part of the reason for this sell-off in the stock market.

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. Have a great weekend!

Tom Crowley

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SPY (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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AGG (F Fund) (delayed)

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