TSP Talk Blog

Despite the Dow gaining 29-points, stocks were mostly lower on Monday, although they battled back most of the day from a weak start to the day. Small caps lagged with a 0.6% loss while the S&P 500 was just south of flat. Bonds have also been quite flat over the last week or so.

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Once again we saw an unusually high number of new lows on the Nasdaq (99) compared to new highs (115) for an index just off its all-time highs. The NYSE actually saw a more healthy ratio at 258 new highs, and 74 new lows, but still 74 new lows with stocks at all-time highs is elevated.

It will be a busy week between the Fed's two-day FOMC meeting (rate decision on Wednesday) and a two-day trade meeting in Shanghai starting today. The market has been pricing in good outcomes and momentum is on the bulls' side, but any hiccups could turn the ship around in August.

Late July and the first few days in August do have a decent seasonal record, but August over-all is historically one of the relatively weaker months of the year.

This is one of the busier weeks for earnings, although many of the bellwether / market moving type stocks have already reported.

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The S&P 500 (C-fund) was facing some resistance heading into the week in the form of a rising resistance line off the recent peaks. That could be a large rising wedge pattern, which would be troubling, but the short-term action has been more favorable and it is a matter of which can continue to hold... the current short-term rising trading channel (blue) or that large wedge (red), which could be ominous if support breaks because of the lack of support below 3000 except for the moving averages.




The DWCPF (S-fund) broke above the old highs last week and since it has been a back and forth battle to hold that breakout. The longer-term rising support line on this chart has already broken so that's a modest warning sign, and now it's going to take the old high, then the bottom of that blue trading channel, to keep this out of trouble.




The Dow Transportation Index was flat yesterday and remains in a rising channel since bottoming in early June. Recent trading channels haven't lasted much longer than this current channel, so we'll see how much steam is behind this move that may be due for a rest.




The EFA (I-fund) had a good day despite another new high in the dollar. This can be considered a big bull flag so right now this looks OK, but I still think the dollar is going to have to pullback for that flag to breakout.




This is a 4-year weekly chart of the dollar and the rally off the early 2018 low explains why the I-fund has been lagging the U.S. stock funds for a couple of years. Now it is testing the old high from the start of 2017 and perhaps it is due for a double top pullback, which would help the I-fund, at least temporarily.




AGG (Bonds / F-fund) has been flat-lining over the last several days and one of the rising support lines has met up with the action and could provide a boost. The top of that gap is still acting as resistance, and if that continues to hold, the second rising support line may come into play. Bottom line, bond yields are remaining stubbornly low for some reason, despite the recent better than expected economic data. It sounds like the bond market is still seeing economic trouble ahead.




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

Tom Crowley


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