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Investors run for cover

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Stocks were hit hard on Monday and we saw some technical damage done to the charts in the process. The Dow lost 602-points on the day and we saw losses of up to 2% - 3% in many indices. Volume was not too bad for a day that was a holiday with the bond market closed. Once the bond market opens on Tuesday we may either get a conformation of the weakness, or a bounce back since the bond market is the one that usually calls the shots over the stock market.

I didn't post a daily commentary here on Monday because of the holiday (hey, I wanted the day off too ), and while I knew the market was open, I'm still not 100% sure if the TSP was processing transactions for Monday with a Monday close of business share price. The wording of their message on tsp.gov, which I posted here on Friday, made it sound like they might, which is different than other holidays. Here's their message again.

"HOLIDAY CLOSING - Some financial markets will be closed on Monday, November 12 in observance of the Veterans Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (November 12) will be processed Tuesday night (November 13), at Monday's closing share prices."

So, I'm still waiting to see how they handle it before I update our AutoTracker for Monday.


Here's are the TSP share prices and returns for Friday, and the Index returns for Monday. If we do happen get TSP share prices for COB Monday, I will update this first chart...

Daily TSP Funds Return


There are many possible reasons for the sell-off on Monday and one of them may be the hedge fund redemption period deadline coming up. With October's big losses, hedge fund customers will look at their monthly statements and, if the lost a lot of money, they may want to pull their assets out of those funds. Investors can cash out of most hedge funds quarterly after giving 45 days notice. So if a client wants their money out by the end of the 4th quarter this year, November 15th is the last day they can request it. So there is some danger over the next three days of big outflows from hedge funds because of forced selling.

That may be why the November seasonality chart has that mid-month lull in what is normally a very good month for stocks.


Chart provided courtesy of www.sentimentrader.com


Another key problem for stocks, on top of rising interest rates and tariffs, is the recent strength in the dollar. This is another form of monetary tightening putting pressure on stock and commodity prices, and not just overseas markets but U.S. companies that do business overseas. The dollar made a new 17-month high yesterday.






The S&P 500 / C-fund fell about 2.0% on Monday after a 0.90% loss on Friday. We were watching how many times the S&P can close above the 200-day EMA since we don't confirm breakouts until we see 3 to 5 closes above major moving averages. We did get 3, but couldn't get that 4th so it's back below that key average. One open gap was filled (blue) and one remains opens near 2680 (red). A test of the lows looks possible here, but at the least I'd expect to see some kind of attempt to fill that open gap, just to clean things up. If we do see a test of the lows, then we have to start the debate about whether we'll see a double bottom or another start leg lower.




The DWCPF (S-fund) is heading down again after its relief rally failed to make it up to the 200-day EMA. The 50-day EMA is now below the 200-day EMA and that can be a bad sign for the intermediate term (1 to 3 months).




The Dow Transpiration Index is showing the classic breakdown pattern. We saw the 200-day EMA hold repeatedly on every pullback during the first half of the year. Since then it has broken below the 200-day EMA and failed twice to get back above it.




The EAFE Index / I-fund gave us that same ominous pattern when it fell below the 200-day EMA back in June and has stayed below it basically ever since.




The financials also rolled back over after a big relief rally, and it also peaked near that 200-day EMA, and well as the 50-day EMA.




The AGG (bonds / F-fund) was up slightly but the bond market was closed. You can see the problem this has with that long descending resistance line being tested again. Yields seem to be on the rise but bonds can catch a bid when stocks are being beaten up and investors are looking for a safe haven.




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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S&P500 (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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