TSP Talk Blog

Stocks were down early but battled back and ended the day rather flat and mixed with the Dow picking up 7-points, the S&P 500 slipping 2, and the Nasdaq was down 12. Small caps lagged a bit as we saw yields moving up (bonds down), and the dollar rebounded adding a little pressure to the I-fund.

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The market is in a very interesting spot. The S&P 500 is on the cusp of major breakout, or a major failure at the 2815 area - the level that has been holding for about 5-months now.

I can hear the arguments on both sides, and when there are a lot of folks on each side of the fence, sometimes the outcome isn't very spectacular for either side and so perhaps we'll see more sideways action.

For the bulls, a trade deal would help, and then there's the Fed who, for a while last year was getting on the market's nerves while it raised interest rates and cut their balance sheet, but now they are playing the Janet Yellen and Ben Bernanke card by giving the market exactly what it wants - a hold on rates and possibly more quantitative easing, if you can believe we're talking about that again.

On the bears' side we are entering earnings warnings season, which is the precursor to next months onslaught of 1st quarter earnings. Weather and the government shutdown will be used as excuses for companies who may be falling short this quarter.

Then there's the March seasonality calendar which changes sides after this week, which is a quadruple witching expiration week for options and futures contracts. The week after tends to be a lot tougher than the week of expiration week.


Chart provided courtesy of www.sentimentrader.com

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The S&P 500 (C-fund) moved above that 2815 wall of resistance temporarily on Wednesday, but closed below it after President Trump, as if on queue, announced the grounding of one of Boeing's 737 planes, just after the S&P slid above that 2825 area. It was unable to get back above it on Thursday so it is either trying to gather strength, or the bears are starting to hold firm again. It's above the 20, 50, and 200 day EMA, which is usually the sign of a bullish market, but it was also above them at the circled areas, all of which failed.




The DWCPF (S-fund) lagged, and again I think it was because of the bond yields moving higher yesterday.




The Dow Transportation Index also slipped a bit but held above the 200-day EMA after a brief break below it. It's usually not a great sign when the Dow is up while the small caps, Transports, and the Nasdaq are all down, but the losses were minor and I may be over thinking it. The chart has an interesting looking bear flag which, because of the angle of incline, might actually be a "V" bottom. We'll see.




The EFA (I-fund) didn't do much yesterday and the strength in the dollar didn't help.




And here is the chart of the dollar, which was up after the recent pullback, and the rising trading channel remains intact, so think about that I-funders.




The AGG (F-fund) dipped yesterday as yields rallied, but this uptrend here remains intact and will until the bottom of that channel breaks. That means bonds could pullback in the short-term while keeping a longer-term rising trend still alive.




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Thanks for reading. Have a great weekend!

Tom Crowley


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