TSP Talk Blog

Stocks were down modestly on Thursday, but that certainly wasn't the story. Down 449 at the lows, the Dow closed with a loss of "just" 139-points after a dovish trade statement from President Trump stopped the bleeding and initiated a big rally into the afternoon. The VIX (Volatility Index) went from a morning lofty high of 23.4 to close down on the day at 19.2. That is still elevated but that's huge intraday decline. Large gaps were opened on at the opening bell, but they were closed during the intraday rally. The S&P 500 also filled a gap that was still open from back in March.

Daily TSP Funds Return More returns

As you may know, there is a trade deadline today and tariffs will be raised to 25% on some Chinese goods if nothing is done to stop it. That had the market spooked and rolling over on Thursday morning but Trump said that he received a "beautiful letter" from China's President Xi Jinping just hours before officials from both countries were set to resume trade talks in Washington ahead the deadline.

The S&P fell right through the 50-day EMA that ignited some broad selling before they (the sellers) all got whipsawed. The reversal came within about 15-30-minutes of our IFT deadline so someone would have to make a decision quickly on what they were seeing at that time, and the indices were moving fast.



I can't say I'm happy about these headline driven intraday swings but I suppose it would be harder to react if it happened when the markets were closed. If you were getting nervous and wanted to sell before this morning's IFT deadline, you did get a better sale price with the afternoon rally, but did you sell a low? If you decided to buy the big morning decline and bought in before the IFT deadline, you got a much worse buying price since the S&P 500 rallied over 30-points (over 300-Dow points) without you.


The 50-day EMA is a key level. We saw it dance around there back in October last year, but when it finally broke, things went south in a hurry. So, the Xi letter, and the close back above the 50-day EMA, may have saved the market - at least for a day.

---

The S&P 500 (C-fund) fell sharply through the 50-day EMA yesterday before the big reversal and strong close that pushed it right back above it. The short-term is now a definitive downtrend but a trade deal announcement, or lack thereof, could cut through any support or resistance like a hot knife through butter. As long as the index is above the 50-day EMA, I'd say the bulls have the advantage. A close or two below the 50-day EMA and the bears will start sinking their teeth in.




This closer look shows the open gap from March getting filled, and the bottom of the gap turned out to be the low of the day. There was actually a gap opened on Thursday morning between 2860 and yesterday's low of 2873, but the reversal filled it already. There is one tiny open gap still out there just above 2740.




Interestingly, the DWCPF (S-fund) finished better than both the small caps of the Russell 2000 (-0.31%) and the S&P 500 (-0.30%) so for some reason midcap stocks outperformed yesterday.




The EFA (I-fund) fell through the 200-day EMA briefly yesterday but close just above it, after falling through the 50-day EMA on Tuesday.




The AGG (Bonds / F-fund) was up on the day but closed off its highs for the same reasons stocks reversed higher. A no deal on trade will push bond prices up and yields lower so any trade headlines will be a major catalyst here. It did close just above the March high for the first time.




Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php

Thanks for reading. Have a great weekend!

Tom Crowley


Posted daily at www.tsptalk.com/comments.php

The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.