TSP Talk Blog

Stocks opened lower on Monday morning, caught some buying interest, but then traded sideways for most of the day for an uneventful, modestly negative day. The Dow lost 86-points while small caps and the Nasdaq struggled and lagged, but for the most part the bears didn't take much advantage of another weak opening allowing the bulls to hold things up relatively speaking.

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Despite the weakness, it was really just the 2nd meaningful down day (Friday was basically flat) in 2019, with the other being the 2nd trading day of the year after Apple's earnings warning. So the bulls may be running out of steam, but it was such a nice run for them over the last 3 weeks that they deserve a little pause. The questions is whether the bears can take advantage or if we'll just see more sideways action or even drift lower, rather than a serious attempt at a test of the lows that we have been expecting.

We went into this week looking for the reaction to earnings from the financials, which has been a lagging group, but they actual did well yesterday despite news from Citi that was just fair. The XLF inched up close to its 50-day EMA, trying to catch up with the other major indices, but as you'll see in the charts down below, the S&P just started to pullback from its 50-day EMA so I'm not sure we got any answers yesterday.




Yesterday's action didn't change anything. As I mentioned, we have been expecting some kind of attempt at a test of the lows, and a couple of flat to small dip days doesn't do much more than take the indices off their extreme overbought levels. We'll just have to see if the bears have any teeth left or if this turns out to be a buy the dip opportunity for the bulls.

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The S&P 500 / C-fund was down moderately yesterday for the first time since the Apple sell-off on January 3. The stall at 2600 is obvious and it was the 2600 - 2625 that we saw the most resistance including the 50-day EMA which is now at 2618. There is a narrowing wedge-like formation that is nearing its apex and the bottom of that wedge was tested at yesterday's lows. The bulls need to hold that support line or the bear may jump back in the game.




The DWCPF (small caps / S-fund) also stalled at some serious resistance where the 50-day EMA, the 50-day Simple MA and the old broken support line are all meeting. It has its work cut out for it since we're still in bear market conditions and resistance tends to hold in bear markets.




The price of oil also backed off from the 50-day EMA, and as much as a catalyst that oil has been lately as far as the direction correlating with the S&P 500 chart, the stock market bulls probably can't afford to see this roll back over here, but that's what seems to be happening right now.




The EFA (EAFE Index / I-fund) had been a small bright spot being one of the averages that made it above its 50-day EMA, but yesterday it changed that by closing back below it.




The High Yield Corporate Bond Fund was down again coming off that recent peak, but it had come very far, very quickly and was due for a break. The question is, how much of a break will it take with all of those open gaps down below?




The AGG (Bonds / F-fund) was down and broke below one of the rising support lines yesterday and the failed breakout (not shown) last week. This could be a change in the trend after the big rally, but it is well above the 50-day EMA still, and that's a bullish sign for bonds in the immediate-term if it can hold, but the short-term has some issues.




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

Tom Crowley


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