TSP Talk Blog

Stocks were mixed again on Tuesday with the Dow gaining 52-points, while the S&P 500, small caps, and more so the Nasdaq, were all down on the day. There were some earnings warnings but we were also within a day of the FOMC meeting which tends to keep the indices afloat. Now we're getting more of the big companies reporting, and the first was Apple last night, which should be a market mover today.

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After the bell, Apple reported a fair, at best, earnings report with some upside in their services side of the business. It was their first quarterly decline in revenue and profit in over decade but the stock had been beaten up pretty badly in recent months so it must have been a form of relief because there was a buy the news reaction in after hours trading since it wasn't terrible.

That rally in Apple also lifted Tuesday's S&P 500 futures into positive territory for the day before they closed at 6 PM ET, while the Nasdaq futures cut their losses by more than 50% on the day. So, it looks like we'll see about 9-points in the S&P fair value added to Wednesday's futures, which will likely to be up anyway, and perhaps 40+ points in the Nasdaq. Barring any unforeseen events, that means we should see a pretty positive open on Wednesday morning.

Lately we've seen weak opens stabilize and move up from morning lows. Yesterday there was a positive open that faded quickly and we closed off the highs (but also off the lows). Now we'll see what happens on a positive open after a big earnings report from Apple. Can the gains hold? Apple may open near the 50-day EMA, which it has been under since the breakdown in November. Let's see how it handles it on this first test back up.




At this point, with Apple rallying like this, I think the S&P 500 needs to make a move to a higher high, and possibly above the multi-layers of resistance, or the bears will be back again. So, as you'll see in the S&P chart below, it may be 2700+ or bust.

There's an FOMC meeting today, but no press conference and no expectations of a change in rates, but of course their comments can always be a market mover. The market has a tendency to do well in the 24 hours leading up to the end of the meeting but according to sentimenTrader.com, "Since the January 2018 meeting, SPY has declined on 7 out of 8 days when the FOMC announced its policy on rates, which it will do again on Wednesday. The day after, it was down 5 of 8 times and even from 6-9 days later, it was still down 6 of the 8."

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The S&P 500 / C-fund was down slightly on the day but with Apple earning's pending and the FOMC meeting on deck, there was light trading volume while investors waited. Apple's earning did move the futures higher after the bell yesterday so what I'd expect to see today is an attempt to close that small open gap near 2660, but after that all of the converging resistance starts to come into play, and that may be where we get some answers as to where this market wants to go - whether it moves above resistance and toward the old highs, or a fade and a head down to test the December lows.




The DWCPF (small caps / S-fund) was down slightly and while the action has been impressive here, the resistance near 1340 is looming.




The Semiconductor Index backed off again from the 200-day EMA yesterday, but after the bell yesterday we saw AMD rally in after hours trading, and so we could see another test of that average today.




This EFA (EAFE Index / I-fund) was up on the day, possibly because of weakness in the British pound, but it too is just in a web of support and resistance lines and these moves within them are just small battles between the bulls or the bears to see who will eventually win the war.




The AGG (Bonds / F-fund) was up strongly as yields continue to decline. This is a nice basing pattern that you might expect before a breakout to new highs, but as you'll see in the longer-term chart below this daily chart, that may not be the case.




The longer-term AGG chart shows that it did breakout to a new multi-year high recently but it fell back below it. If the prior peaks in this area are any indication, we could see a long sideways consolidation before a breakout. I would think only a recession would push this over that 107 level for any length of time.




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

Tom Crowley


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