TSP Talk Blog

Despite being a negative day across the board on Friday, there were certainly varying degrees of weakness in the indices - something we have been seeing a lot lately. The Dow lost a modest 76-points while the Nasdaq and small caps were pounded quite hard. The S&P 500 was somewhere in the middle but nothing too alarming, while the I-fund escaped with a strong day.

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The GDP came it at 4.1%, a solid number but still near the lower end of the estimated range. I would have thought the market would have applauded the high growth while it was still below an overheated 5% figure that some were expecting.

The problem may be that we have seen an internal weakness in the market with the indices being bolstered by fewer and fewer high profile stocks, like the FAANG stocks. But earnings have been a little disappointing in some of those high flyers and we saw stocks like Facebook and Netflix take some big hits this earnings season.

The trade war headlines have been market movers but so far buying the dips on those headlines has paid off, and the most recent headline was a plus with the EU and US coming to some agreement on trade. China remains very much unresolved.

The other headline grabbers right now have to do with continued attempts to take President Trump down. The post earnings market brings on the summer doldrums and it will look for other catalysts. The audio tapes from Trump's old attorney Michael Cohen, have been the current talk of the media. I have no idea what will come of this but so far it has just been entertainment, but if it gets more serious I suppose stocks will eventually react.

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The S&P 500 / C-fund filled the January open gap last week and has since backed off for a couple days. The sell off on Friday did fill one of the open gaps below (red) with another remaining open near 2765. The rising trading channel is still intact but having just hit the top of it, there is now a lot more room on the downside should the S&P continue to trade within it.




A closer look shows the F-flag is still intact. As I've said before, they have a tendency to break down eventually, and this one may be getting a little long. You can see the gap that was filled on Friday and did provide support. If this can pullback to the 50-day EMA and fill that open gap down by 2765 it could be another good place to find support, but that sounds too convenient and the market may not cooperate.




The small caps (S-fund) had a rough day on Friday but found support that the 50-day EMA and the rising support line. This could be a line in the sand for the small caps.




The EAFE Index (I-fund) has been outperforming recently- perhaps because of the recent trade talks with the EU, and perhaps because the dollar has pulled back recently. The downtrend has broken and it could be starting a new uptrend, but it will have to get above the June high before that is confirmed.




The Volatility Index hit the 200-day EMA on Friday and then backed off. You can see how effective that moving average is as far as acting as support or resistance. But if it can break through that's when the market sees some big moves. The bulls are probably still in charge as long as this remains below that 200-EMA.




The AGG (Bonds / F-fund) fell below the rising support line last week and has since formed a bear flag. The 50 and 200-day EMAs look like the levels to watch to see which way this wants to break. We know bear flags tend to break down, but bonds have a reputation of being a little frustrating to the technical analysts.




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Thanks for reading. We'll see you back here tomorrow.

Tom Crowley


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