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Dip buyers keep jumping on tariff pullbacks

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Stocks were mixed but mostly flat on Friday despite a big midday swoon caused by another trade related headline. An afternoon rally erased the losses and the Dow ended the day up 9-points. The Nasdaq was lone major index to close in negative territory, after giving up an early 30-point gain.

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It seems the market has been hearing the same news over and over regarding tariffs on China, yet the knee-jerk reaction is always the same as well. We get the knee-jerk reaction to the downside that is quickly bought up. I know it's the definition of insanity to expect anything different, but how long can this pattern go on? The Pavlovian response to one of these dips may eventually leave dip buyers salivating without being fed, but as I said, by definition that thinking may be considered insane.

Things may get a little tougher going forward as the market will have to work with a negative seasonal breeze blowing in its face for the rest of the month. Not a primary indicator, but a headwind could slow things down, even if the bulls can manage to remain in charge.


Chart provided courtesy of www.sentimentrader.com





The S&P 500 / C-fund traded within the same range on Friday, as it did on Thursday, and the trade headline was the catalyst for pushing it toward the lower end of that range, which surprisingly didn't fill the small open gap just below it. We've seen this pattern before -- higher highs, pullbacks, and higher lows - all of this occurring within the rising trading channel. As I mentioned above, the negative seasonality going forward may be the obstacle to try to break this trend.




The small caps (S-fund) did well on Friday but closed off their highs after failing to gain back all of the tariff tantrum midday selloff.




The Nasdaq is lagging a bit and may be up against some minor resistance here
. There is some internal weakness as well when looking at new highs / new lows but the chart looks fine in that rising channel so the onus is one the bears to exploit any weakness or negative divergences here.




The Dow Transportation Index made a new high early Friday and remains in its rising trading channel, but there is some resistance in this area coming off the prior highs.




The EAFE (I-fund) has had a meaningful bounce off the lower end of its channel's support line and is heading for the 50-day EMA, along with the 200-day EMA, which are upside roadblocks for this bear market chart.




The AGG (bonds) was down Friday and now it is below all of the major moving averages, as well as below the two major support lines. It may be due for a rebound but technically it is putting itself in some trouble with little support underneath it.




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

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