TSP Talk Blog

Stocks were mixed but mostly higher again led by the small caps on Wednesday. The Dow was actually down on the day, held back by Caterpillar and Boeing's stock, but the broader indices, which actually opened weakly, rallied all day while the much of the country was distracted by the Mueller hearing. The Dow lost 79-points while the S-fund jumped well over 1% on the day.

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You certainly can't argue with the price action as the bulls seem to be in control again. Earnings have been coming in stronger than expected, but expectation had been lowered greatly and in many sectors their numbers are lower this year compared to last, yet the S&P 500 is up nearly 30% since that Christmas Eve 2018 low.
The breadth number and new highs / new lows list looked better yesterday, although surprisingly there were 91 new 52-week lows made on the Nasdaq yesterday, to go with 143 new highs. The high numbers on both ends is the reason we have been seeing those Hindenburg Omen warnings.

The charts look good, although somewhat stretched at the all-time highs, but what has been most impressive, and frustrating on my end, is that many of the market tendencies that I look at have been pointing to trouble ahead, and the least likely outcome is coming through. For instance, one model might say 18 of the last 20 times that XYZ happened, stocks were down the next month, and only up 2 times. Well, we've been getting those 2 out of 20 times coming out instead, and that may have to do with the imminent Fed rate cut.

Facebook reported earnings yesterday and the initial reaction was positive, but Ford and Tesla sold off in after hours trading after disappointing reports. 3M, Amazon, Google, and Intel are a few of the big names reporting today.

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The S&P 500 (C-fund) made a new closing high on Wednesday forming another small basing pattern within that rising channel. As we've talked about before, new months can bring new direction, so be careful next week.




The DWCPF (S-fund) had a really big day yesterday, and it's as if the world was waiting for something to say, "now it's time to jump into small caps." Actually it was the small banks that propelled it higher as financial stocks did well yesterday. The flag formation broke to the upside, and new 2019 highs were made, but it is still off its 2018 all-time highs.




The EFA (I-fund) was up, but maybe not as much as you'd expect given the action in the U.S. stocks, but again it is the resiliency of the dollar that may be holding it back.




And here is a 16-month chart of the dollar showing it making new highs this week.




That is also holding back the price of oil which, after what has been happening in the Middle East, you'd think would be doing much better but it continues to struggle because of the dollar, some high inventories, and possibly because of demand being down.




AGG (Bonds / F-fund) hit the top of that old gap again but couldn't penetrate it, but it certainly isn't backing down either.




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

Tom Crowley


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