TSP Talk Blog

Stocks opened lower on Thursday, then rallied off the weak open, but the bears finally stepped in and had a day for themselves. The bulls weren't going quietly as we saw the indices come well off their lows by the close, but still the Dow lost 221-points and we saw losses near 1% in most of the major indices, although the small caps held up a little better. The only positives yesterday were the defensive side of the market like real estate, the utilities, and bonds.

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An announcement regarding Trump and Xi's next trade meeting not being held until March 1, their temporary trade war temporary deadline, had investors worried, but the overnight futures were down and growth concerns seem to be coming more into play.

The S&P 500 is currently priced with expectation of 17% earnings growth this year but we're seeing many companies not even close to that, and several at 0%, so investors may be looking to take some profits at these higher prices. It may be as simple as that.

The yield on the 2-year Treasury Bond went below 2.5% yesterday and also indicates some concerns about the economic growth, and the strength in bonds in general is perhaps a canary in the coalmine for the stock market. Also, we have the 200-day Simple Average right in the way and it may be contributing to investors making the decision to take profits.

The losses yesterday took the S&P 500 into negative territory for the week, although just slightly. As earnings reports wind down, the Fed out of the way until March, and no meeting between Trump and Xi planned until March 1st, we have a market that may be void of catalysts so profit taking could make sense here for those who have held this long.

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The S&P 500 / C-fund pulled back from the 200-day SMA but the bulls didn't completely sit back as the index rallied off the morning lows after dipping below the 200-day EMA temporarily as well.




The DWCPF (small caps / S-fund) moved below the 200-day EMA intraday on Thursday, but came back to close back above it. Weakening growth is a bad word for small caps yet they held up rather well in comparison to the large caps and tech stocks.




The Dow Transportation Index also failed to move above the 200-day EMA before pulling back. It did break down from a small rising wedge formation and seems to be at the top of a trading channel, so there may be some room to fall here with support just below 10,000.




The EFA (EAFE Index / I-fund) was down hard with weak economic data coming out of Europe, which sent the dollar rallying and the combination did a number on the I-fund yesterday.




The dumb money indicators at sentimentrader.com show them now 68% confident in a rally. It hasn't been this high since just after the market peaked last January / February.


Chart provided courtesy of www.sentimentrader.com


The AGG (Bonds / F-fund) is consolidating and remains resilient and the strength here may be telling us that the bond market is concerned about growth rates in the U.S.




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Thanks for reading. Have a great weekend!

Tom Crowley


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