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Another sell-off, but some buying at support

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Another day of selling on Tuesday as the Dow gave up an additional 280-points, which makes it about 550 points in two days. The rising trading channels are broken but if there was a bright side it was that the indices closed off their lows, with a few indices bouncing at some key support levels. The market leading Transports were hit the hardest shedding another 2%, but it bounced off the 200-day EMA, something it has had trouble doing this year when falling.

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As opposed to Monday's action, we did see the safety plays get bought as gold and bonds both rallied solidly. Gold has been in a downtrend for the last several months so a tell of how meaningful this pullback in stocks will be, could be whether gold breaks that downtrend.




It's all about trade right now, although the market may have been looking for an excuse to pullback after a two-month rally. There is an important trade deadline on the 15th of this month and the closer we get to that date without some kind of concession on the new tariffs being implemented, could make or break this month's return in stocks.

Normally a December in a year like we've had with the indices up over 20%, would almost always be up as well, but these trade negotiations have been hard core on both sides, and unfortunately the back and forth, good news / bad news has us market timers and investors stuck in the crossfire.

The November jobs report comes out this Friday and could be another market mover. Estimates are looking for a gain of 182,000 jobs and an unemployment rate of 3.6%.



The S&P 500 (C-fund) fell sharply below its nearly two month long rising trading channel on Tuesday, after cracking on Monday. It fell below the 20-day EMA for the first time since October, and a test of the 50-day EMA now seems more likely, except for the fact that we had a strong positive reversal day that the bulls will likely try to add onto. However, there has been a shift in sentiment and momentum and it may not be easy.




The DWCPF (S-fund) opened sharply lower but closed strong and only lost 0.33%. It did break its rising channel as well, plus it fell below the July high support line. The 1430 area looks to be a possible target on any further selling, and that blue line could now act as resistance. One small open gap was filled and another was opened (purple).




The Dow Transportation Index took another 2% haircut on Tuesday, and while it didn't rebound as much of the other major indices, it did try to hold at the 200-day EMA. It fell back below the 50-day EMA, which is never a good thing, and recent prior tests of the 200-day EMA all seemed to fail once tested.




The EFA (I-fund) bounced off its 50-day EMA after a morning sell-off, and again a weaker dollar helped out here.




The High Yield Corporate Bond Fund has been so resilient for a long time, and yesterday it seems to have easily held above its 50-day EMA. That's a positive for stocks, but there does seem to be a slowdown going on here as it has been trading near this 86.40 area for months.




The AGG (F-fund / bonds) bounced back from Monday's strange sell-off in bonds. This is the kind of action that we'd expect if stocks are falling sharply, so maybe it's back to normal and the breakout above the bull flag may be ready to resume.




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: www.tsptalk.com/plus.php

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

Tom Crowley


Posted daily at www.tsptalk.com/comments.php

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S&P500 (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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