TSP Talk Blog

Stocks were flat by the close on Friday but it was actually another minor victory for the bulls who were able to take another awful opening and rally stocks into the close. The Dow lost 6-points, but that was the high of the day. Oil was down so the stock market still seems to be following its lead.

Daily TSP Funds Return More returns

The market seems a little stretched in the short-term after the sharp rally that started after Christmas. At this stage everyone is trying to figure out if this is a "V" bottom that is going to continue higher, or if this is just one of those explosive bear market rallies that is destined to fail, and at least move down to test the December lows again. This is likely a make or break week for the bears and if they don't make their move now and roll this bear market rally over now when many of the charts and indicators look primed for just such a reaction, then they may just miss their chance.

Earnings season gets into gear this week with some important bank reports. Despite the recent rally, or because of it, the financial index charts are now in vulnerable positions, as are many stock charts, but the financials have lagged for some time and now they stalled a bit last week while the S&P and small caps were still rallying. This looks like a do or die area, and what happens next here could set the tone for the rest of the market, so keep an eye on those earnings reports this week.




And as earnings start to come in from the various sectors, it's the forward guidance that will be the focus. Sure, if they miss their revenue or bottom line numbers, they will get punished, but even a beat may not be good enough if they can't reassure investors that the next quarter is also in good shape. We've seen signs of an economic slowdown so look for that and / or the uncertainty of the trade war for excuses from companies as to why they're coming up short and / or giving forward looking warnings.
The futures are down at the open Sunday evening, but they were down sharply the prior two days as well and that all reversed when the stock opened for regular trading. I'm speculating but that sounds like the dumb money (mom and pop investors) are buying while the market is open, and the futures traders, normally a little more savvy, are selling. Unfortunately, mom and pop are usually the last to buy before things peak.

---

The S&P 500 / C-fund has moved relentless higher since the December 24th sell-off but is is now nearing some stiffer resistance and the bulls may have a tougher time from here, but if they can push this above the 50-day EMA, we could actually see a new wave of buyers, so we're at an important juncture. The low in early January after Apple's earnings warning has been an interesting time for the bulls as they bought that weakness, but now the charts and indicators are stretched and near resistance so the bears have their opportunity, if they want it.




The one-year chart shows the S&P coming back up to about where it broke down last month and theoretically that's when the resistance should firm up.




The DWCPF (small caps / S-fund) has now rallied over 15% off the December low and like most of the other charts, it is up against a bevy of resistance include the 50 day EMA and Simple MA, as well as the old broken support line drawn from the previous lows (blue line.)




The EFA (EAFE Index / I-fund) did make a bullish move last week after moving back above the 50-day EMA and the longer-term resistance line, but some of that was the work of the dollar which has been rolling over. The 62 area seems to be the next speed bump in the road for the EFA.




After making an early move higher on Friday, the price of oil started to pulled back right near the 50-day EMA and those closing highs from back in December. The stock market has been following this rally in oil higher so if we start seeing this resistance hold here, the stock market may be vulnerable as well.




The AGG (Bonds / F-fund) tried to climb back above that resistance line but closed below it again and so far this has been a failed breakout. But it had made a dramatic move higher over the last couple of months and a little pause / pullback here, and some consolidation, would seem healthy, rather than just soaring to another new high.




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

The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.