TSP Talk Blog

Stocks opened higher on Tuesday, but they struggled to make much headway as the indices were mixed by the close with the Dow up 31-points, the Nasdaq up slightly, while the S&P 500 / C-fund and small cap fund were down slightly. It's been a big run off the early October lows and while the charts suggest they need a little rest, the question is, will they take one?

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The S&P 500 is up about 8% in the last 23 trading sessions and that's a big move. It's nothing we haven't seen before, but since the peak in early May, these types of rallies have been met with significant pullbacks.




There is a good argument for stocks to rally meaningfully into the end of 2019, but that doesn't mean there won't be few hiccups along the way. It seems the absence of trade war talk has been a catalyst, although the 3rd interest rate cut, a strong jobs report, and decent earnings are certainly part of the equation. So far the impeachment process has done little to derail the rally, but that could heat up later this month.

So we have a good setup for stocks, but they don't go straight up. The question for many of us market timers is whether it will give us enough volatility to give us good trade setups, or if we should just get in stocks and accept small ups and downs into the New Year.

Mondays is Veteran's Day and that is one of the Federal holidays where the TSP is closed and won't be processing transactions, but the stock market will be open. The bond market is also closed. I won't be posting market commentaries that day. And I'm not certain yet, but my wife and I will be on the road starting Thursday afternoon making Friday's commentary questionable. It may have to be a brief one.

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The S&P 500 (C-fund) stalled for a day and had every opportunity to fill Monday's small open gap, but it didn't so the bulls were holding back the bears fairly easily despite the small loss. So there's still two open gaps below an old resistance line, which held as support on Tuesday. Either that first open gap gets filled today or it looks like that old resistance line will be the new rising support line.




The S-fund was flat on the day after some morning gains were stopped at the top of that sharply inclining trading channel. 1461 was the prior high back in July just before a sharp sell-off, and that looks like a key level here.




The Dow Transportation Index hit the April high and pulled back fairly sharply considering how quickly it ran up to that level this morning. That's a possible negative reversal but the prior highs could be there as support, otherwise we have a couple of open gaps that may need filling below there.




The EFA (I-fund) was down, filling in a small gap in the process, although it's tough to see it on this year-to-date chart. It is approaching some possible long-term resistance, although that resistance is rising.




The dollar was up sharply having its negative impact on the I-fund, but that rally took it back to the bottom of the broken trading channel, and that could be resistance on the way up. That wasn't the case in early July when it jumped right back into that channel.




I mentioned the other day how the bond fund has a tendency to do the opposite of what the technical analysis might suggest. Yesterday's breakdown in AGG (F-fund) was one of those days. We saw the rising support line and the 50-day EMA break on the downside. I don't know if this is another fake out since the 112.00 - 112.75 area has been holding for weeks now, and perhaps buyers are coming in at that level, rather than at the broken support levels I mentioned. But yields are certainly rising, and if that continues the bond fund will not be the place to be, so 112 is a key level here.




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

Tom Crowley


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