TSP Talk Blog

Stocks were off sharply to start the holiday shortened week, and although we did get a decent push higher into the close, the Dow ended the day down 302-points and the S&P 500 basically gave back all of Friday's big gains. The Nasdaq lagged with a loss near 2%, and the small caps' losses were commensurate with the large caps. The down day snapped a 4-day winning streak and the S&P had been up 9 of the last 11 trading days.

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I mentioned the possibility of a post-holiday reversal in yesterday's commentary and seeing the big gains on Thursday and Friday getting met with Tuesday's sell-off is a little more extreme than we normally see, but there it was.

The negative action was blamed on a couple of things but one was a rumor that the White House cancelled a trade meeting with China. We saw the Dow down over 460 points at the lows, but some damage control comments from President Trump's top economic advisor Larry Kudlow denying the cancellation of the meeting, gave stocks a small boost into the close.

The actual analysis is probably somewhere in the middle and with stocks getting overly extended in the short-term, it seems like it was looking for an excuse to pullback and gave investors a reason to take profits.

Oil was down 2% on the day so the S&P 500 continues to follow its lead there.

IBM posted solid earnings after the bell and was up quite a bit in after hours trading (+7%), which should help the Dow, but the S&P 500 futures actually didn't react as positively so the earnings may not be enough to get investors off the trade bug.

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The S&P 500 / C-fund filled a very small gap near 2645, but kept going down and pulled back all the way to the 50-day EMA before buyers stepped in, with the help of Larry Kudlow's statement. There's still a lot of overhead resistance but so far the 50-day EMA has held in the first test back. Today will be a big one for the technical analysts who will need to determine if we're staring a pullback from the recent peak, or if the 50-day EMA is going to hold and keep the bullish rebound going after a one day pause.




The DWCPF (small caps / S-fund) remains on a positive trend but there was a little wobble when Friday's lows were taken out. It's still above the key 50-day EMA and a couple of important trend lines, although the rising support line did technically get broken.




The Dow Transportation Index is in the same boat in that it broke above the 50-day EMA on Friday, came back to test it on Tuesday, and so far held.




The EFA (I-fund) -- ditto. The 50-day EMA has been holding up well for a couple of weeks with only one close below it in that time. Yesterday's low was just above the average.




The High Yield Corporate Bond Funds, which helped propel stocks higher over the last month, took a hit on Tuesday, falling back below the November high but remained in the flag formation, although rising "F" flags are a little more dangerous than bull flags. When they break down, it can be quick.




The AGG (Bonds / F-fund) were up but lost some steam after peaking in the early afternoon. That created a negative reversal bar and a false breakout from that wedge formation. That's potentially bearish, but only a very short-term read right now.




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

Tom Crowley


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