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Outside reversal again

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Stocks pulled back on Tuesday with several stories hitting the headlines and investors were left to figure out what it all meant. The Dow lost 172-points on the day, which isn't overly significant, but as you will see in the charts below, there were some negative outside reversal created and that can be bad news - at least for the short-term. The Dow was up about 200-points earlier in the day and down 230 so the swings continue to be rather wide.
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Was it the Chinese tariff talk, the firing of the Secretary of State, the CPI report, the nixed Qualcomm deal, or something else that sent stocks down on Tuesday? It was more likely a combination of everything, on top of the fact that we saw a 441-point rally on jobs report Friday and, as we talked about in earlier reports this week, that tends to lead to some reversals in the coming days. So far the Dow has given back about 230 of those points this week.

The Nasdaq was particularly weak yesterday with its 1.2% loss, but it had been running very hot and had the most gains to lock in. The question now is whether the old resistance line at the breakout area will hold or not. Pulling back to test the resistance is typical, but a strong market will hold there.

The S&P 500 / C-fund opened higher yesterday but things reversed near the open again, as they did on Monday. This one produced a negative outside reversal bar on the chart and it is looking more obvious that the open gap will be an initial target for this post-jobs report pullback. So far there's been no technical damage done to the chart during this rebound, but it's close to a failed breakout above the prior peak.

The small caps / S-fund have been one of the leaders on this rebound and yesterday's 0.30% loss made it one of the out-performers, despite the loss, but that open gap from January got filled and some upside resistance held, so this is a decent test for the small caps.

The Dow Transportation Index was the leader yesterday with a solid 0.48% gain but it too posted a negative reversal pattern, although not an outside reversal day like some of the other charts, which are more severe.

The EAFE Index / I-fund has had a nice bounce off the lows but it is lagging the U.S. rebound and this looks like a big bear flag stalling at the 50-day moving averages. Ugly.

The German DAX has been on our radar as one of the European, and I-fund leaders, but it continues to struggle below the 200-day average. It failed after filling a small open gap this week, and it has made another potential lower high during this descending trend.

The AGG (bonds / F-fund) remains in a consolidation that looks like a bear flag, so this chart continues to look weak.

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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