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Early rally, selling late... again

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For a third straight day we saw stocks open near their highs of the day, then close near the lows. The Dow just 11-points but also gave away an early triple digit gain. The S&P 500 and small caps saw minor losses but the Nasdaq performed well after Treasury Secretary Mnuchin told CNBC that the U.S. and China were close to a trade deal.

Daily TSP Funds Return


Later President Donald Trump said he's optimistic about a trade deal with China, but also said he’s happy with the way things are going and is still considering putting tariffs on all Chinese imports. So, stocks started to fade and the headline / tweet driven market is still running the show during the vacuum between the more important Fed interest rate discussions.

As we'll see in the charts below, the dollar broke its rising trading trend in June and that has helped push oil, gold, copper, and to some extent bitcoin, higher this month - not to mention stocks here and abroad. But some of those charts are now up against technical roadblocks so the test may be just beginning. We've already seen the S&P 500 fail at a double top (so far.)

Bonds were down for a change, but can bond yields continue to fall while we wait for the July 31 FOMC meeting?



The S&P 500 (C-fund) continues to slide back after hitting that double top last week. Double tops don't necessarily mean the market has peaked, but rather a pullback from a double top is common and can often be muted pullbacks that end quickly. Is that the case this time? I don't know, but this is a little more than a double top in that since the highs of 2018 we have seen several rallies fail in this general area. I'm looking at that open gap as the next possible downside target, and if that gets filled, we'll reexamine the situation.




The DWCPF (S-fund) held on most of the day but floundered near the close giving it a fourth consecutive day of losses. It has now closed below the key 50-day EMA for two days.




The Dow Transportation Index had a good day rallying 0.66%, but it had been beaten down quite a bit this week and was due for some relief. It's below the 50 and 200-day EMA's and technically still in serious trouble. The Dow Theorists are not digging this action.




The EFA (I-fund) was up with a small gain, but the late selling is U.S. stocks on Tuesday gave the fund some negative fair value which hurt the I-fund's price yesterday. The dollar has been falling this month helping the I-fund stay near its recent highs. There's not a 100% correlation but the dollar is a key for the I-fund, and when the dollar is falling I'd expect a better chance of outperformance from the I-fund over the U.S. funds.




The weakness in the dollar this month has really helped the price of oil, which was already rallying due to the situation in Iran. It just closed back above its 200-day EMA and is about to test some descending resistance today.




The price of gold has also turned around in June after a late May rally, and the weak dollar looks to be a catalyst here as well.




Even bitcoin has come to life. It had been rallying pretty good all year but it has moved into another gear in June as the dollar fell.




AGG (Bonds / F-fund) was down on the day and it is now resting on the short-term rising trading channel. Bond sentiment has gotten quite extended on the bullish side and I would think a pullback is due, but I've said that more than once this year and it barely blinked.




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. We'll see you back here tomorrow.

Tom Crowley



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

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SPY (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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