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Stocks up... mostly, but some internal weakness

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Stocks rallied again on Tuesday, or at least many of them did. The Dow led on the upside again with a solid gain of 143-points, or 0.58%, but the broader indices didn't do quite as well with the Nasdaq closing barely positive, while the small caps and the Transports actually had poor days, closing down on the day.

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There was some late buying that helped push the Nasdaq back into positive territory so that means we did see the dip buyer out again, but internally we saw some weakness. On a day that the Dow gained 143 points, the NYSE only had 56 more stock up than down, compared to a +1500 on Monday.

And despite the Nasdaq slipping back into positive territory, there were actually 621 more stocks that were down than up, so there was some profit taking despite the indices themselves showing some gains.

Another round of tariff talk with China from president Trump seemed to shake up the futures in after hours trading yesterday so while the trade wars may be somewhat priced in already, perhaps investors are not going to ignore the trade noise completely. But that's OK. Volatility is a market timer's friend.

As we've talked about in the past, big rallies (or declines) after a surprise jobs report can be reversed after a few days. That's not always the case if the jobs report is a real game changer. If you recall, it was the January jobs report that was released on February 2 that sent stocks lower after hitting all-time highs in January. That was the one that showed accelerated wage growth and that sent inflationary and interest rate hike fears across the markets and it was a game changer. But more commonly, a good (or bad) report will move the market and then we see the digestion of that move within a few days. That could be what we were seeing here in the small caps and Nasdaq as they both tested recent all-time highs.

No alarm bells yet but we are at the top of a range and perhaps a little caution is warranted. If we see new highs and they can hold, then it will be risk on again.

The S&P 500 / C-fund poked above some resistance in the form of that cup and handle formation we talked about yesterday, and it closed at a new 4-month high. It's possibly at the top of that range and may pullback from here, but there is also a rising parallel trading channel (in blue) that could intimate a higher level of resistance is out there. The small gap near 2765 remains open so that is a potential downside target.

The small caps (S-fund) pulled back yesterday but if we are following the pattern that we've seen over the last several months, there are pullbacks (red) and there are dips (blue), and we had the pullback in June so the dips may be very brief like we saw in May and early June, if we get another.

The Dow Transportation Index pulled back but it did manage to close above the 50-day EMA again.

The Financials could not follow-through on Monday's big rally and the 50-day EMA held as resistance again.

The EAFE Index (I-fund) also pulled back and the 50-day EMA continues to prove to be resistance.

The AGG (Bonds / F-fund) dipped again and the May high continues to provide some resistance.

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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