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Inching higher - towards resistance

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Optimistic trade talks, another rally in oil, and Fed meeting minutes that investors took as more dovish, and we got another good day for stocks on Wednesday. The Dow gained 92-points making it four straight positive days, but it did lose more than half of its gains in afternoon trading. Small caps led again, and the I-fund had a big day as the dollar continues to really rollover.

Daily TSP Funds Return

There's a lot of noise in Washington surrounding the government shutdown, but Wall Street seems unfazed by it with stocks trading higher in 8 of the last 10 trading sessions. But the real concern has been the Fed, and more so the trade war. We did hear some clarity from the Fed as they seem to be giving a more dovish tone, although they are still tightening the balance sheet, but the S&P 500 is actually now back above the level it was before the December 19th rate hike.

We did get some positive comments regarding the China trade negotiations yesterday and that seemed to set the positive tone early yesterday, but we've been back and forth on this one for almost a year now so I'd expect volatility to pick up again if the non-deal status drags on.
As far as the rebound goes, we're hitting some tougher resistance areas in many of the charts the longer this rally goes on, and we actually saw a little fatigue late yesterday, but after a 10% plus rally, I would think the bulls may need a little rest anyway.

I found out yesterday morning that I had some issues with the charts in yesterday's commentary (the public commentary in the blog section) and I had posted some important longer term key resistance levels that the S&P and other indices are very close to testing. I won't repost them here again, but you can find those charts here if interested... January 9 Commentary.

The S&P 500 / C-fund inched higher again making it 8 of 10 days in positive territory since that Christmas Eve sell-off. I know I'm not the only one seeing the resistance that is overhead, and I half wonder if the pullback at resistance is so obvious, that the bears are going to get dragged right above it since the market tends to like to fool the most people it can at times like this. "You think you know what you're doing?"... "I'll show you!" But that 2600-2625 area, and even as high as 2640, still looks formidable in this bearish market - yes is is still bearish given its position in relations to the trend lines and moving averages.

The DWCPF (small caps / S-fund) hit the 50-day EMA yesterday and paused. That's typical on a first test, so what happens next is fairly important, although the DWCPF is not the most clean chart when it comes to technical analysis because it is not a highly followed index.

The EFA (EAFE Index / I-fund) one upped the S-fund chart by climbing above the 50-day EMA yesterday. There's still a lot of overhead resistance, but the big drop in the dollar was enough to help the EFA hurdle the 50-EMA.

Here's that chart of the dollar with several reasons technically to be concerned, so the I-fund may be the outperformer while this chart weakens. It doesn't mean the I-fund will be up, but it could outperform the C and S-funds if this turns out to be a top in the dollar.

The High Yield Corporate Bonds rallied yet again, but the technical's are showing a little bit of a roadblock being hit. It is quite extended to the upside after a monster rally, and it filled the one overhead open gap on the chart, then reversed down yesterday. Now all of the open gaps are on the downside. This credit market gauge has led stocks on the way up so the bulls may not want to see this rally end in HYG.

The AGG (Bonds / F-fund) was up as it found support at the bottom of that long rising trading channel. The bond market is certainly not onboard and economic recovery talk yet as yields continue to sink. The Fed's more dovish outlook lately may be confirming this.

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

Tom Crowley

Posted daily at

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SPY (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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AGG (F Fund) (delayed)

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