TSP Talk Blog

Although the final numbers may not indicate it, it was another wild day on Wall Street on Thursday. The bulls did have a small victory with the Dow gaining 100-points on the day, but by comparison, it certainly did not getting back much of the 800-points it had lost on Wednesday. The broader indices performed even less impressively with the S&P gaining just 0.25% while small caps and the Nasdaq closed slightly in the red.

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There was a lot of the action during the overnight and pre-hours trading as we saw 45+ point moves in the S&P 500 futures leading up to the opening bell. That's the equivalent to about 450 - 500 Dow points, and we saw that multiple times from midnight until the closing bell.




There was some positive trade news on Thursday but the market didn't exactly spike up as we have been used to so it seems that investors are more focused on bond yields right now.

The 2 year / 10 year spread was able to stay positive into the close, with a couple of inversions overnight.




As a reminder, the 90-day and 10-year yield spread has been inverted for several months now. The Fed is watching and are concerned, but we are starting to see some decent economic data show up again which throws a wrench into the what the bond market believes is happening. It is almost certainly pricing in a recession.

Yesterday the 30-year Treasury actually fell below 2% for the first time in decades, and as far back as my data goes which is 40 years.




Right now we're in the process of investors looking for a bottom. The indicators are extreme and a bounce may be coming soon, but that doesn't mean the lows are in for this leg down.


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The S&P 500 (C-fund) completed another "h" pattern, which is a form of a bear flag so they tend to breakdown the way the one in May eventually did. That breakdown led to a solid low, although that's no guarantee, but when that's happening there is a lot of panic and it's tough to be a buyer, and while the risks are higher, the relief rallies off those extremes can be explosive.




The weekly chart shows that the S&P is currently testing the 50-week moving average which, except for that December plunge last year, has repeatedly held. Otherwise, the red support line is another area that could get tested.




The DWCPF (S-fund) fell into that early June open gap before rebounding. It didn't quite fill it, but that may be good enough technically, although we still haven't gotten the "get me out at any price" kind of selling action that can indicate a bottom is in.




The Dow Transportation Index also hit a significant level when it successfully tested the June 3rd low. This would be a good place to see a bounce, even if only temporary, but as I mentioned above, it doesn't feel like we've seen enough pain to put in a low.




The EFA (I-fund) fell below that late May low on Wednesday, and yesterday it rallied but couldn't get back above that old low.




AGG (Bonds / F-fund) spiked up yet again and that old red rising trading channel may be done. If it can hold above it for a few days, the top of that red channel may become resistance. But how high can bonds go, or better yet, how low can bond yields go?




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Thanks for reading. Have a great weekend!

Tom Crowley


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