TSP Talk Blog

It was another positive day for the stock market on Wednesday. The Dow added 207-points to Tuesday's 500+ day. We've also seen 80+ S&P 500 tacked on, or about 3%. If this is a dead-cat bounce, it may be nearing an end. But if it is more than that - something similar to what we saw in January, there could be a lot more to go. That's where we are now.

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The lack of trade war headlines helped keep the bears at bay for another day while the oversold market gets some relief. However, after the bell yesterday the futures started to slip after the negotiations between U.S. and Mexico failed to reach a deal on tariffs and immigration in their 90-minute meeting. Like the China situation, who know how long this could play out?

We expected some relief from the extreme oversold conditions, but once we get it, we have to decide whether we believe in the move, or if it's time to start thinking about taking profits.

The May jobs report comes out on Friday morning, and estimates are looking for a gain of 180,000 jobs, an unemployment rate of 3.7%, and wage growth of +0.3%. That could be a market mover as we have been talking about, since the Fed is getting more dovish about helping the economy, which has seen some signs of a slowdown. Is bad news in economic data good news at this point? Possibly, if a rate cut is the goal, but the stock market may not be as excited about more weak data. If the jobs market, which has been very stable over the last few years, starts to wobble, it may be a game changer.

Despite the big rally in stocks, we are seeing signs of that economic slowdown in the form of bond yields falling and the inverted yield curve as shorter term bonds are paying more than the 10-year Treasury. We're also see those economically sensitive commodities like oil, copper, and lumber continuing to struggle.

Oil did close off the lows yesterday, potentially creating some kind of reversal, but both oil and copper are at their lows for the year after falling sharply again yesterday.

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The S&P 500 (C-fund) popped again and this time closed back above that 100-day EMA that had been a critical support level for much of the year before it broke down last week. It cleared the descending resistance line and there is an open gap up by 2850, and those could be upside targets, but it also would have to get above the 50-day EMA to do so. Technically I think it needs to hold above 2800 from here on out.




The DWCPF (S-fund) lagged yesterday but posted some modest gains. The 20-day EMA actually held it back yesterday, but on a positive note, the old descending resistance line, which was broken on Tuesday, acted as support at the lows on Wednesday.




The Dow Transportation Index was up nicely on Wednesday but it still has a descending resistance line to deal with near 10,200. 10,400 may be doable if it can get passed that first resistance.




The EFA (I-Fund) also lagged badly and a lot of that had to do with the rally in the dollar.




The dollar was up and it created a positive outside reversal day after finding support at the 50-day EMA.




The AGG (Bonds / F-fund) slipped again as yields ticked up. This one has been due for a pullback so I am avoiding it for now.




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

Tom Crowley


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