TSP Talk Blog

Despite the holiday, the stock market was open yesterday and it was quite a ride, but because the TSP was closed we didn't get any price updates for the day. That means Tuesday's prices will incorporate the market action from both Monday and Tuesday. The returns in the table below are from Friday. Stocks were down sharply lower in the morning but bounced to close just slightly negative for the S&P and small caps, so the C and S-funds will start Tuesday with a slight loss. The Dow gained 40-points on the day and that was after it had been down over 220-points in early trading.

Daily TSP Funds Return More returns

The interesting part of the day was that the bond market was closed because of the holiday, and without the bond market the stock market was without what has been its major catalyst. I heard one of the anchors on CNBC put it this way... "The stock market is the feckless kid brother of the bond market and it doesn't really know how to act when unsupervised."

So we got a lot of volatility yesterday with big declines and a big rebound, but today the bond market reopens and we'll see how stocks act with big brother back in the picture.

We've seen some technical damage done to some charts with others, like the chart of the S-fund, bounce off the 200-day EMA. Outside of the TSP, this is not a highly followed index, so to see it hit that EMA and bounce cleanly is rather interesting.




The question is, how much of a bounce can it get from here? Any upside would certainly qualify as a dead-cat bounce because of the magnitude of the recent decline. The further the decline, the tougher it is for something to jump up and spring back to life. For now the 200-day EMA appears to be the line in the sand, but any rebound may need to come back to retest the lows.

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The S&P 500 / C-fund fell through the 50-day EMA for a second straight day, but for a second straight day it managed to crawl back and close above it. That's a good sign and a good place for the S&P 500 to find a low. The problem is that we're seeing some other leading indices like the small caps, the Transports, and the Nasdaq all already below their 50-day EMAs. The S&P tends to be a follower, not the leader.




The year-to-date chart of the S&P 500 also shows a possible strong level of support being tested and holding so far. And, despite some intraday breakdowns, it has continued to close above the January highs.




The Dow Transportation Index fell below its 50-day EMA and rebounded strongly on Monday. Normally I'd say this is a great sign but with the bond market closed and holiday trading in the stock market, we better wait and see how things go today before calling this bullish.




The EAFE Index looks bad again and at this point the only positive might be that it is getting closer to the bottom of its descending channel.




The High Yield Corporate Bond Fund fell hard for a 4th straight day but yesterday it hit the bottom of its rising trading channel and held. Corporations have to offer higher yields to compete with government bonds, and when the yield they have to pay on their bonds go up, the price of their stock can get impacted negatively. That may be what we're seeing in the stock market right now.




The bond market was closed yesterday but the bond ETF AGG still traded. It was down just slightly on the day, but more meaningfully, Friday's low filled an open gap from back in May. This is quite oversold and may be due for a rebound, but I wouldn't look much past any short-term rally.




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

Tom Crowley


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