TSP Talk Blog

After back-to-back strong months for the market, stocks pulled back to start December with some sharp losses. The Dow lost 268-points and the broader indices lost somewhere in the neighborhood of 1% on the day. Bonds and gold were also down so it wasn't an outright sell risk, buy safety play, but that could change if the downside continues into the week.

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A weaker than expected ISM Manufacturing Index was given the blame for the overdue pullback. President Trump used this weak economic data to poke the Fed again about needing more interest rate cuts, but I don't think the Fed is listening - or at least they don't see a need yet, but the weaker the data gets, the more they may consider it.

That brings us to the November jobs report which comes out this Friday and could be a market mover. Estimates are looking for a gain of 182,000 jobs and an unemployment rate of 3.6%.

As we talked about, the first half of December isn't much better than any other month as far as seasonal advantages go. It's the last week or two where the bears seem to hibernate and allow the bulls to roam. 2018 was an exception, although there was even a strong bounce after Christmas Day and into the New Year last year, despite the S&P falling 9% in December of 2018.




Also, you may notice that the 1st trading day in December of 2018 was positive before things went south in a hurry, so there's a chance that Monday's decline was a fake-out. In reality, the market does need a break after a two-month rally so a fake-out and continued upside would make for some very vulnerable charts.

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The S&P 500 (C-fund) pulled back sharply on Monday, slightly breaking below the narrow rising trading channel that it has been in since early October. It also filled an open gap in the process from last Monday. Technically, it is still in good shape trading above all of the major moving average and close enough to the channel that we don't want to call it a breakdown yet. If the bears means business, the onus will be on them to do what they haven't been able to do for two months.




The DWCPF (S-fund) lost over 1% on the day as the decline flirted with the bottom of its rising trading channel and the top of the July highs. The channel breaking is one small crack, but if the 1460 fails we'll be looking for the September highs and the 50-day EMA to be the next possible downside target.




Despite moving higher in early trading, the Dow Transportation Index eventually pulled back and also lost more than 1% on the day. The 50-day EMA is looking to hold again, and while it isn't too symmetrical, that could be a bearish head and shoulders pattern forming.




The EFA (I-fund) was down on the day, but the manufacturing data sent the dollar down sharply and that gave the I-fund a slight cushion.




Here is that sell-off in the dollar, and it too is looking for support from the 50-day EMA after the two-day decline.




The big dip in the dollar also helped the price of oil rebound on Monday, but it is still below the 50 and 200-day EMAs, as well as the rising trading channel.




The AGG (F-fund) fell sharply on Monday and not only fell back within its bull flag, but it opened blow, and basically held there, the 50-day EMA yesterday, although bonds closed strongly, at the day's highs, and it may be considered a positive reversal day.



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

Tom Crowley



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