TSP Talk Blog

Stocks traded in a wide range on Wednesday after Turnaround Tuesday's sell off. The bulls came out fighting at the open on the heals of IBM's strong earnings report, but it didn't take long for the bears to resume their selling and we saw a dramatic morning drop off the opening highs, down to the lows, in just a couple of hours. The Dow, up nearly 300 at the highs, gained a solid 171-points by the close, but most of that was because of the 8.5% gain in IBM. The gains were mixed in the other indices with the Nasdaq nearly flat and small caps down modestly.

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The S&P 500 traded in a 40-point range on the day so the 5-point gain didn't really tell the story. There were actually more stocks down on the day than up, and as I said, IBM's gain had a lot to do with the large cap indices being green.

The wide range and the close near the middle tells us something about the indecision from investors as the bulls and bears sort things out and battle for position. We have the government shutdown looming with no end in sight, and if anything they seem to be preparing us for a prolonged shutdown. The market has shrugged it off so far but there are figures to indicate how each week is negatively impacting the GDP, albeit slightly.

The bears seem to have their opportunity so if the bulls just come roaring back, that would say a lot about the market strength. But news on the trade front, and earnings reports still have the ability to shake things up in either direction making it uncomfortable at times for both the bulls and the bears right now.

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The S&P 500 / C-fund was up modestly and depending how you look at it, we either saw decent buying near the lows and the 50-day EMA, or the bears were able to sell the bulls' attempt to end the pullback already. That's four straight closes above the 50-day EMA, which is a positive, but it is still hanging around that area so it's tough to call it a victory for the bulls just yet. There's a lot of resistance still overhead.




The DWCPF (small caps / S-fund) had pulled back sharply before the afternoon rally yesterday and it found support right where the bulls would want to see it hold - the 50-day EMA and the lows from back in October and November. But there was a slight break of the rising support line so that 1300 area looks to be an important level.




The Dow Transportation Index broke down sharply below the 50-day EMA during the morning sell-off, but it did come back like the other indices and close off the lows. It did end the day with a solid 0.9% loss and this market leader now finds itself below back the 50-day EMA.




The EFA (I-fund) was up nicely with the help a decline in the dollar and it remains hovering above the 50-day EMA and the rising support line, while staying just below a couple of resistance lines. This one will have to resolve itself pretty quickly as it reaches an apex.




The High Yield Corporate Bond Funds were up on the day erasing some of Tuesday's losses and it remains in the "F" flag. It could rise along that channel for sometime, but those "F" flags do tend to eventually break down.




The AGG (Bonds / F-fund) did yesterday what it could not hold on Tuesday, which was a breakout to the upside of that falling wedge formation. It remains below the longer-term rising support line but it has since been consolidating nicely and holding up rather than rolling over, so that's a good sign for bonds right now.




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

Tom Crowley


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