TSP Talk Blog

Stocks rallied on Tuesday, and despite a midday sell-off after the British Parliament rejected Theresa May's Brexit plan, they bounced back to close near the highs of the day. The Dow gained 156-points, or 0.65%, while the Nasdaq led with a big 1.7% gain. Small caps and the I-fund lagged slightly but were up solidly.

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JP Morgan and Wells Fargo reported earnings yesterday and both actually disappointment, and while Wells ended the day down slightly, JP Morgan, and stocks in general, were up so that's interesting. Strong markets can rally on bad news, but there is one issue I see on the charts that could be setting up investors for a letdown, after yesterday's bull flag breakout.

With the S&P 500 now up 11% off the lows, we did see similar bull flag breakouts last year that turned out to be peaks. Is this another one? I don't know, but the mounting resistance in this 2615 - 2625 area, after an 11% rally, should give it some trouble unless we're heading into another super bull market or something of the like.




Clearly this market needs a rest but the more people expect a pullback, the more frustrating the market seems to make it for them. So far earnings have not negatively impacted the market despite some disappointments, but they really start to roll in over the next two - three weeks so we'll see if that trend can continue in the face of a possible sell-the-news reaction set-up, to the big rally leading up to these reports. Once people start giving up on the possibility of a test of the lows, that's when we might expect it.

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The S&P 500 / C-fund broke above a small flag formation yesterday stretching it even further after a few days of sideways action. The 50-day EMA is about 10-points above yesterday's close and there's even more longer-term resistance, not shown on this chart since it starts back in early 2018.




The DWCPF (small caps / S-fund) was up nicely yesterday but it just got back Monday's losses. It's sitting basically right near the 50-day averages and the old broken support line.




The Transportation index was down rather sharply yesterday, but after the bell United Continental Airlines reported earnings and it was a good one so this may change. That is unless the market in general falls which could weigh heavy, otherwise it may be looking to move up to test its 50-day EMA like the other indices.




The EFA (EAFE Index / I-fund) moved back above the 50-day EMA so the back and forth continues here. The Brexit situation could add additional pressure, but so far it has ignored that noise this year.




The Financials rallied nicely despite some disappointing earnings from a couple of the major banks, but like some of the other indices, it is pressing the 50-day EMA from below.




The AGG (Bonds / F-fund) was slightly higher on the day but it is still in stall mode since making the new 52-week high to start the year. There's a small bear flag forming now so I would suspect the next move could be lower for bonds.




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

Tom Crowley


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