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What trade war? ... Investors ask

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The tariff tantrum lasted a day as we saw the big losses from Wednesday completely reversed on Thursday. The Dow picked up 224-ppoints on the day while tech stocks led with the Nasdaq jumping 1.4%. The small caps and the Transports lagged a bit with neither getting back all of Wednesday's losses, but there was green across the board.

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So the S&P 500 rallied up to the top of its range yet again with 2800 holding and while the charts are starting to look poised for a breakout, this has been a tough level for the bulls to surmount. As we head into earnings season with new highs within reach, the recent gains may be setting up some profit taking, so the battle is on.

The financials were up slightly yesterday but saw some relative weakness compared to the broader market indices, and it failed again to get above the 50-day EMA. We'll get some bank earnings this morning and it will be interesting to see if it sets the tone for earnings season.

These bank earnings wouldn't be a major indicator of economic strength or weakness, but there are so many financial stocks in the S&P 500 and Russell 2000 that it could either help weigh on the indices, or bolster them if there are negative or positive surprises. With the financial stocks being beaten down so much of late, you would think that they can only surprise on the upside, but the chart still looks pretty bad so it's difficult to be too optimistic.

The S&P 500 / C-fund nearly hit 2800 again, an area that has repeatedly act as resistance. I always say the more someone knocks on the door, eventually someone will let you in so we will see if anyone opens that 2800 door for the bulls, or if the top of this long range swats the index back down again. The short-term trend is up (blue channel) but that gap remains open near 2765, so that's still a possible target if 2800 holds.

The small caps (S-fund) were up but not quite as much as the large caps. It could be a cup and handle formation or even a bull flag forming, both of which are bullish formations, but since the double top the small caps have been underperforming the large caps.

The Dow Transportation Index also lagged a bit with the 0.44% gain versus the 2% loss the prior day. It remains below the 50-day EMA after a one day failed break above it. This chart has been holding firmly above the 200-day EMA, but it still looks suspicious.

I mentioned the Semiconductors yesterday and how they have been struggling lately. Here's the chart. After rallying to fill the open gap earlier this week, we're seeing a lower high potentially being formed and it is back below the 50-day EMA.

The EAFE Index (I-fund) was up nicely but still sits below the key 200-day EMA. It is only down a little over 1% for the year, but looking at the chart, you'd think it was in a bear market.

The AGG (Bonds / F-fund) was up again and continues to flirt with that overhead resistance at the May peak. The open gap is lying on the 50-day EMA so 105.80 looks like a good place for a pullback should the resistance hold.

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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