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The bulls take a break as earnings season kicks off

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Stocks bounced around in fairly tight range on Wednesday, and while there were a few attempts to push the indices into the green, we ended the day with mostly red numbers with the Dow slipping 23-points. The Transportation Index was an exception as it was up for the 5th time in 6 days, and the I-fund held onto gains as the dollar fell and the German DAX made a new high.

Daily TSP Funds Return

The small caps were interesting, as you'll see in the charts section below, since the Russell 2000 was up, the midcap stock index was basically flat, as was the S&P 500, and our S-fund tends to land itself somewhere in the middle of that bunch but instead it was down about 0.4%, which is a bit odd to me.

The reason that is of interest to me, besides the obvious that it is one of our TSP funds, is that there is a possible negative head and shoulders pattern on that DWCPF chart, and it really can't afford to rollover too much here.

Two weeks from today the Fed will give their next monetary policy statement and interest rate decision and the futures market is still pricing in a very optimistic 87% chance of another rate cut. The day after the Fed meeting we'll get the October jobs report. That's an eternity away when talking about market timing, but in the interim earnings season is starting to kick in.

We got a mixed bag yesterday with Netflix reporting and rallying strongly, as was Alcoa, but IBM, a Dow stock, floundered again so it could be a day that the Nasdaq leads the Dow.

The S&P 500 (C-fund) posted an "inside day" where the high and low of the day were both within Tuesday's high and low. It felt like the bears were trying to make a move and the bulls were slowing down, but no damage was done. I'm still looking over my shoulder at that open gap near 2950, which is a downside possibility, but I do like that the PMO indicator just crossed above its moving average just as we are heading toward the strong seasonal period of the year.

The S-fund was down moderately yesterday, and as I mentioned above, that was rather odd given the positive return on the Russell 2000 and the flat (-0.09%) action on the midcap index. Something in that index was dragging it down, although I'm not sure exactly what it was.

I mentioned the new highs in the semiconductor index yesterday so it would be remiss of me not to mention that it fell 1.5% yesterday and as of now is considered a failed breakout. Still, that's a good looking cup and handle chart, primed for an eventual breakout.

The Dow Transportation Index was up for the 5th time in 6 days and that's now two closes above the 200-day EMA, and basically four above the 50-day EMA, although Monday's close was right on it.

The EFA (I-fund) was positive after a second straight decline in the dollar, and this chart is flirting with new highs. It actually moved above September's high already, leading the S&P 500 to the punch.

Germany has the largest economy in Europe and the Germany DAX is one of the top holdings in our I-fund. While they are not breaking any growth records over there, the German DAX index just made a new high for the year.

AGG (bonds) had a nice bounce yesterday after a series of weak days, and it didn't come a moment too soon. The 50-day EMA and that rising red support line need to hold for this rising trend in bonds to continue, and that's a good possibility. However, if the rally in stocks continues we could see more money move from bonds to stocks.

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:

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

Tom Crowley

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SPY (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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