TSP Talk Blog

The Dow was down 22-points on Thursday but we saw small caps and Tech stocks do very well so it was another mixed day. The S&P 500 eked out another small gain while the Transports rallied sharply on some positive news from the airlines.

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Wilbur Ross, the Secretary of Commence, stated yesterday that the U.S. and China are still "miles and miles from getting a resolution" on a trade deal, and that sent stocks lower earlier in the day, but they battled back and actually had a decent day with about 2 stocks being up for every one down.

Last year (2018) it was Friday, January 26 that was the peak before the dramatic sell-off that lasted for two weeks where the S&P 500 went from 2872 down to about 2525, or about a 12% loss. That's when all of the trade war talk started and fast forward a year and we're in the same boat with a little back and forth in negotiations but not much progress. The S&P 500 is still about 250-points (or 8.6%) below that January 2018 peak.

It may be a stretch but the chart action leading up to that January 26, 2018 peak looks similar to where it was last Friday, January 18, 2019. Now we'll watch to see if it plays out the same way, or if the bear market is going to be put to rest. There are a few lines in the sand drawn with a move above 2700 being the ultimate goal for the bulls.


Click chart to enlarge


After the bell, Intel posted a miss on earnings revenue and issued light guidance for next quarter so the stock was down in after hours trading, and that took a bite out of the Nasdaq's futures for the day, and took the S&P 500 futures into the red for the day, so we'll start Friday with a bit of a headwind for stocks The futures may look positive, but fair value is negative (-34.00 for Naz, -8.00 for S&P). I'll show the semiconductor ETF chart down below.

Starbucks reported a strong report and was rallying after hours, but coffee and semiconductors are not quite the same when it comes to the economy and moving the indexes.

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The S&P 500 / C-fund was up slightly on Thursday but it has basically been digesting the big gains from last week, and the chart looks suspiciously like the peak from last January (see chart up above). You can see all of the resistance that is still overhead and anyone who is really bullish right now is making a lot of assumptions about the strength of the market and it's ability to run through these walls.




The DWCPF (small caps / S-fund) had a very nice day and it continues to hold above the 50-day EMA, but it too is below some key longer-term resistance so we don't know if this is the end of a bear market rally, or soon to be a breakout into a new bull market.




The Dow Transportation Index gained over 1% yesterday on some strong action in the airline stocks. It's still dancing around the 50-day EMA but it did make its way back above it after Wednesday's breakdown. That's a good sign, but it's still below that 200-day EMA.




The semiconductor index rallied sharply yesterday but it peaked at the 200-day EMA and then, after the bell, Intel delivered some negative news regarding their revenue and guidance, and in after hours trading the SMH ETF dropped right back down. It may look to fill the gap opened on Thursday near 91, which would erase that big gain.




This longer-term SMH chart shows just how formidable that 200-day EMA is, whether it's trading above, or below it...




The price of oil was up yesterday but it has been basically moving sideways since the big rally on January 9th. It's in a slowly rising trading channel, but that's one of those F-flag type of formations, which could hold for a while, but they do tend to eventually break down.




The AGG (Bonds / F-fund) popped up yesterday and we seem to have a legitimate breakout out of that falling wedge formation, and we're now seeing yields in the 10-year Treasury getting close to the early January lows.




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Thanks for reading. Have a great weekend!

Tom Crowley


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