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Bulls can't hold gains, but bears may be running out of time

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Trade war on, trade war off. The switch continues to be flipped and stocks are getting tossed around like a rag doll. The Dow was up as high as +458-points on the day but closed up "just" 157, so it lost 300-points in the final hours of trading. This back and forth has been a recent standoff between the bulls and bears and unless the bears can capitalize soon, the bulls will get the added boost from the holiday seasonality and could win this battle. Also, a key level held on the S&P 500, which we'll show you in the charts below.

Daily TSP Funds Return

I keep saying we need one more push lower to shake the weaker holding bulls but so far they have not relented. Perhaps it's that algorithm trading and not emotional players, and that could change what we're used to seeing at the lows, I don't know. Either way, if the bears don't make a move, the bulls may. But the one thing standing in the bulls' way between now and the historically positive Christmas week is next week's FOMC meeting.

The other day I wrote something about the Fed generally having a positive influence on stocks after their meetings or speeches, but I wasn't exactly right. I went back and checked to see what happened after the FOMC meetings this year - the ones where they actually did raise rates, and this is what I found.




So the market wasn't exactly thrilled with the rate hikes, but in those prior meetings the Fed was saying they are on a mission to push rates higher. This time they will most likely raise rates but give a more dovish outlook, as Powell mentioned in November, just before a big relief rally. Can the market rally again on that same sentiment, or will they sell the rate hike again? Let's not forget that they are still unwinding their balance sheet and reversing the quantitative easing which tightens liquidity.



Chart source: https://www.federalreserve.gov




The S&P 500 / C-fund posted a solid 0.54% gain on Wednesday but clearly it wasn't a tremendously positive day after giving back about 3/4's of its intraday gains and closed at the lows of the day. That usually means more downside in early trading today, but the low yesterday was right on that 2650 mark, which is one of the levels of support that needs to hold, although 2625 has been the main level to watch.




The DWCPF (S-fund) was up nicely but also reversed sharply creating a negative reversal day. 1280 - 1260 are the levels to watch here.




The Transportation Index lost all of its early gains and this one is struggling, which is not a good sign for the general market when one of the major market leaders closed basically at its low close for the year.




The I-fund / EAFE Index shows a big rally (+1.92%) but that is because the overseas markets were closed when the late-sell-off in U.S. stocks started.




The Volatility Index has been over 20 for most of the month so traders continue to expect the market to swing up and down in the coming days.




The AGG (bonds /F-fund) may have hit its highs at the double top after the big rally off that double bottom over a month ago. That was a nice run for the bond market while the stock market was jumping all over the place.




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)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
BND (F Fund) (delayed)

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Yahoo Finance Realtime TSP Fund Tracking Index Quotes