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Choppy action to start the week. Small caps up, big caps down

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Stocks spent the day looking for a direction as the action was quite choppy. Unfortunately for those in the stock funds, the Dow and S&P closed down and near the lows of the day, but small caps held onto a solid gain, which is quite a change from recent action. The Dow lost a modest 89-points, but that was nearly 250-points off the highs, while the small caps gained a respectable 0.24%, although that was barely noticeable on its volatile chart. Volume dried back up to normal levels after last week's high volume panicky selling.

Daily TSP Funds Return

Apple was a drag on the market after Goldman Sachs said the tariffs may negatively impact demand in China, and often times as goes Apple, so goes the market.

There were several attempts at a rally on Monday and we were actually seeing the day's highs with the Dow up nearly 150-points about an hour before the closing bell before things went south in that last hour.




The late weak action is not usually a good sign for the following day, at least initially, and the bears may have another opportunity to do some damage in the early trading hours. If they can't push the S&P to lower lows then I'd suspect where just sitting in a choppy area where the bulls and bears may dual it out for a few more days, something we often see while the market is trying to make a low. The moves could be wide and that should put some fear into both sides at times.





Trade / tariffs with China and bond yields have been the key, but now we turn to earnings again and that could make or break things. Yes, interest rates are rising and the Fed is unwinding its balance sheet and that's a headwind, but if earnings can come in solid and guidance isn't disappointing, things could be OK. But that's a big IF.




The S&P 500 / C-fund made a slightly higher high yesterday, over Friday's action, and a higher low, but it could not hold above the 200-day EMA, which is of course concerning. A test of Thursday's low is possible and we could bounce around within Thursday's range for a few days (red box below), but Thursday's low must hold or another leg down could get ugly. You can see how much the trading volume dried up yesterday, which is a positive sign since it makes Wednesday through Friday's volume look like a possible capitulation.




The DWCPF (S-fund) posted a decent 0.24% gain yesterday, but after the pounding it has taken recently, it didn't mean all that much. It seems investors were just a little more interested in the beaten down sectors yesterday.




... and the Dow Transportation Index was another one of them. The chart looks terrible after free-falling for several days, but it had gotten so oversold that investors put some money to work there.




The Financials have been underperforming for some time and the recent decline took the XLF down toward the 2018 lows. This has held fairly well all year so perhaps we'll see a bounce, but I'm always concerned when something is tested repeatedly. Eventually they tend to break down, but in this case with interest rates rising, you would think financial stocks would be getting a bid. We'll find out soon enough.




The EAFE Index stayed below some key resistance but it is quite oversold.




The AGG (bonds / F-fund) was down slightly and that resistance line we drew on Monday near 104.90, held again yesterday.




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

Tom Crowley


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


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