TSP Talk Blog

Stocks rallied early on Tuesday, peaked within the first couple of hours of trading, and faded lower closing near the flat line although Apple and Google both lost about 2% dragging the Nasdaq down with them. The Dow lost 19-points while the broader non-tech part of the market was mostly flat.

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The Fed is likely to cut rates today but investors don't expect much after that, and the question is, will a "one and done" cut satisfy investors or will they want more? It would seem that if the Fed says they are done with cuts than perhaps that would be telling us that we have avoided a meaningful downturn in the economy? If they had their foot still firmly on the gas pedal, that would indicate that they are concerned about the economy, so perhaps investors will see this as a good sign.

But since we have rallied right into this meeting, as we have done before, it could be a time that we see investors taking some profits. At least we have seen that a few times this year already.



Also, November trading starts on Friday and it's not uncommon for the market to change direction when a new month starts, so we have to be ready for that possibility. We're also heading right into a strong seasonal period for stocks so the dip buyers may be lying wait for an opportunity. It should be interesting, especially with what's on deck...

Tomorrow we will get earnings from Apple and Facebook after the bell. The House of Representatives plans to hold a vote on an impeachment inquiry on Thursday. And on Friday we'll get the October jobs report this Friday and estimates are looking for a gain of 90,000 jobs, and an unemployment rate of 3.6%.

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The S&P 500 (C-fund) rallied early but by the close it had a bit of a negative reversal formation on its hands. There's a 5-point open gap at 3027 that could easily be filled today after the FOMC rate decision because we know volatility will pick up. The question is, what will happen after the dust settles? Tomorrow we may see an impeachment vote in the House. Friday there's a jobs report and a new month. That's a lot of questions marks, and while the action has been very good for weeks now, there are a few possible roadblocks in the short-term to get by.




The Nasdaq was down fairly sharply yesterday when Alphabet (Google) and Apple each lost 2% and that pushed the index back down and so it pulled back from the test of its all-time highs.




The Dow Transportation Index had moved above the July and September highs on Monday before putting in a negative reversal day, and following that up with another small loss. The losses were benign for now, but it's back below those highs and that's a bit of a concern. It may be too early to call it an official failed breakout since it never did close above the old highs, but it looks like it needed a rest. Perhaps the Fed will ignite a rally and change that, but looking at the chart here as is, and there's some short-term concerns.




The S-fund was up again and it had broken above its descending resistance line off the July highs, but it too is facing a little more resistance at the September highs after a big rally over the last 3 - 4 weeks.




Like the S&P 500, the EFA (I-fund) has cleared some hurdles as it closed above the July high for a 5th straight day. That's usually a confirmation for me but again, over the next three days the Fed, the impeachment vote, the jobs report, and Apple earnings, and we have some question marks.




The AGG (bonds / F-fund) was flat to slightly higher on the day but it remains below the 50-day EMA and the rising support line, so technically it is in some trouble. Perhaps the Fed can change this direction, or is it that the Fed is going to follow the lead of the bond market where yield are rising? Not that they would raise rates, but it's a possible signal to stop cutting.




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

Tom Crowley


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