TSP Talk Blog

Stocks opened lower on Friday, after a slightly stronger than expected jobs report that was actually more of a mixed bag. The main attraction however was a mid-day announcement about Chinese tariffs that sent the indices lower, and from there we saw a bit of a battle between the bears ad the bulls whether to buy or sell into the close. The Dow lost 79-points on the day and the losses were broad, but fairly muted.

Daily TSP Funds Return More returns

The August jobs report beat estimates but we saw downward revisions in prior reports so it was kind of a wash. What got the market concerned, particularly the bond market, was the higher rate of wage growth that sparked inflationary concerns. That likely cemented in the September rate hike at the September 26th FOMC meeting and we saw the yield on the 10-year Treasury hit 2.95% on Friday, which looks to be heading back to test 3%.

The trade talk continues to be the market mover, despite a lot of other political chaos going on that the market has seemed to thus far ignore. But we have seen spikes in the indices, up or down, each time there is a trade related news story released. Over the summer we had seen investors jump on these trade related pullbacks rather quickly so this week will be another test of that trend.

---

The S&P 500 / C-fund has been down for four straight days but it peaked seven trading days ago so this is a meaningful pullback, at least compared to the action we have seen since the start of the summer. the losses have been fairly benign though, and perhaps we will need a little bit of a scare before things turn around -- one of those sharp declines that eventually reverse back like we saw in Mid-August as well as in late and early May (circled in red below). I thought we may had seen one on Thursday but the jobs report and $200 billion in Chinese tariffs had the S&P making another lower low instead.




The small caps (S-fund) are down almost 2% off their highs. That's not too significant and whether we see a more meaningful decline may determined early this week as it tests the old, tough resistance line that it broke above last month. If that fails, then the 50-day EMA and the bottom of the channel would be next.




The Dow Transportation Index fell below a rising support line just before the holiday weekend, and has closed below it for five straight days. But in the process it may be creating a bull flag so watch that 11,250 area, the bottom of the flag. If this wants to breakout to the upside, that support needs to hold.




The Nasdaq is down testing some important support where the 50-day EMA meets the bottom of the rising trading channel.




The EAFE (I-fund) has been hit hard again and the bear market persists. If there's a bright spot, it's that there is some support just below the Friday low, and we have seen some nice bear market rallies on this chart when they come.




The High Yield Corporate Bond Fund has been pulling back and actually peaked a couple of days before the S&P 500 last month, which is what we'd hoped it would do since we use this as an indicator of strength in the credit market which usually translates into whether investors will be buying or not. So this little dip off the highs did tell us that stocks may be looking to pause, and it did breakdown from the sharply rising support line. Now the question is whether the 50-day EMA and the old resistance line (blue) can hold as support again or if it wants to go back into the wider trading channel (blue).




The AGG (bonds) was down as inflationary concerned were sparked by the wage growth in the latest jobs report. 10-Year Treasury Yields touched 2.95% on Friday.




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: www.tsptalk.com/plus.php

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

Tom Crowley


Posted daily at www.tsptalk.com/comments.php

The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.