TSP Talk Blog

Stocks opened higher on Wednesday after the positive reversal on Tuesday. The Dow gained 147-points, which is fine, but it had lost 660-points in the prior three trading days, so it was fine but nothing too impressive, especially with the late selling. Both the S&P 500 and Nasdaq basically gained back Tuesday's losses with their gains yesterday.

Daily TSP Funds Return More returns

The ADP National Employment Report came in well short of expectation (67,000 actual vs. est. of 140,000). That's the reason the dollar fell and when the dollar falls we can see asset prices increase. We know the I-fund is impacted greatly by the dollar, which is why it outperformed yesterday, but aside from stocks, look at oil (+4.2%) and copper (+1.4%).

Gold was down but it rallied sharply on Tuesday and we may have seen some profit taking because it has been suspiciously weak in recent months, although possibly primed for a breakout from a bull flag.



Who cares, right? Well it's just another puzzle piece in this economy that has been teetering on whether we get a recession or not in the coming year, and a breakout in gold would be a possible warning sign for stocks.


This chart shows a couple of things, and you can click on the image to view a larger version. The red lines show what happened at prior instances when the rising support lines failed, which just happened the other day. The blue dashed lines represents about 225 S&P 500 points, which is about how far above the 200-day EMA the S&P had gotten at least week's peak, and how that compared to prior short-term peaks.




We saw bonds fall back yesterday after the big rally on Tuesday. Yields move counter to bond prices so yields were up yesterday (bonds / F-fund down) and it looks like a classic bear flag forming.



The reason that is important, beyond the fact that the F-fund could do well if yields break down, is because a move higher in bonds combined with a breakout in gold if that bull flag we just talked about can break to the upside, could mean more of a shake up in the stock market.

That's what shaping up now, but of course the only thing that seems to matter lately is the trade negotiation headlines.

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) opened higher to fill an open gap (blue) and opened another small gap (red) just below 3100. The break down from the rising channel is a warning sign, but a test back up to the bottom of that channel is possible whether this rolls over again or not. So that makes 3130 and 3140 interesting possible upside resistance levels in the coming days.




The DWCPF (S-fund) rallied but faded quite a bit from the intraday highs, and in doing so created a negative reversal day. That's a good example of testing the bottom of the trading channel it had recently fallen through, and it did act as resistance.




The Dow Transportation Index moved higher, tested the 50-day EMA and attempted to fill that open gap above 10,700 before pulling back and closing well off the highs, despite holding onto decent gains.




The EFA (I-fund) rallied, and as I said above, the falling dollar has been helping it, and it remains near the recent highs.




The High Yield Corporate Bond Fund continues to be resilient. This one does not seem to ever fall apart and that's one reason why stocks have remained buoyant. The credit market appears healthy.




The AGG (F-fund / bonds) pulled back after Tuesday's big rally as yields moved higher on the weak dollar after that ADP report we talked about above. This still looks like a breakout from the bull flag, and a successful test of the top of that flag, so bonds look pretty good here.




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

The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.