TSP Talk Blog
The bears are trying to make a move
by , 03-07-2019 at 01:15 AM (629 Views)
Stocks opened relative flat on Wednesday but faded throughout the day, and the smaller the stocks were, the more worse they fared. The Dow lost 133-points, or 0.52%, the S&P lost 0.65%, the S-fund, which does contain mid-cap stocks as well as small caps, lost 1.5%, while the small caps of the Russell 2000 lost 2.0%.
The indices are still very close to those recent highs but the losses are getting a little stiffer and the freight train momentum we talked about earlier in the week, has been slowing down. Technically, the pullback is barely worth mentioning at this point, but a 2% loss in the Russell 2000 yesterday, and a 9-day losing streak in the Dow Transportation Index is going to catch some folks' attention. By the way, that 9-day losing streak in the Transports is the longest in 10 years (Feb. 2009.)
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The other eye opener is how firm that 2800 resistance area on the S&P 500 has held so far. It's not a surprise to see a pullback after the gains we've seen this year, but the question is whether this is the start of something bearish, or just another dip to buy. Tomorrow is Friday and we have talked about how strong they have been this year so again, buying opportunity, or are we closer to the last chance to sell near the highs of this rally?
We get the February Jobs Report on Friday and estimates are looking for a gain of about 175,000 jobs, an unemployment rate of 3.8%, and wage growth of 0.3%.
Administrative Note: We are announcing a new section on TSP Talk that we are going to try out called Retirement Talk with Tony. It will be retirement related articles - eventually posted regularly once we get started - from Tony Kendzior: CLU, CHFC, Retirement Planner. We've made a mutual agreement where Tony will provide free retirement content for us on TSP Talk, and in exchange we will give him a link to his financial / retirement planning services website for anyone who may be interested in finding out more. It looked like valuable information to me, and since retirement is not my area of expertise, I thought it could be a good fit for us so let's see how it goes. I'd like to welcome Tony to our team, and I hope you like the new material!
The S&P 500 (C-fund) pulled back from the resistance line for a 3rd straight day. There's hasn't been any damage done yet but if that right shoulder of the inverted head and shoulders pattern is going to try to get filled in, there could be more downside to go. That 200-day SMA may be our first clue. If that holds as support, the bulls will be back in charge quickly, but if it doesn't hold...
The DWCPF (S-fund) was hit hard on Wednesday, one of the worst days of the year for the S-fund (January 3rd and 22nd were worse). It fell below the 20-day EMA for the first time since January 3rd, and that ended one of the longest streaks ever. It's tough to say what this means going forward since it certainly can't keep up the pace that it had been on, but the 50 and 200-day EMA are just below and could give us the answer.
The Russell 2000 small cap index did fall below its 200-day EMA so it's the mid-caps that the S-fund is counting on to keep the chart technically sound.
As mentioned above, the Dow Transportation Index was down for a 9th straight day yesterday, which is the longest losing streak for the Transports in 10 years, if you can believe that (Feb. 2009.)
The EFA (I-fund) continues to hold up well, and that's despite the dollar being up sharply over the last week or so.
The AGG (F-fund) rallied sharply as investors moved from stocks to bonds again. The high yesterday hit the bottom of the old support line so it could get a little tougher from here.
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Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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