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TSP Talk Market Commentary 01/14/2020

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Stocks started the new week as if the bulls had something to prove after Friday's modest losses. There were no geopolitical incidences over the weekend that concerned the market, so any nervous money that stayed on the sidelines on Friday looks to have been put to work on Monday. The Dow gained 83-points, but percentage-wise the broader market did much better with the Nasdaq and small caps leading the way.

Daily TSP Funds Return

The market internals were very strong with more than two stocks up for every one down on the NYSE. Does that mean we have a lot more upside to go, or is this more froth with that will eventually fizzle away?

The S&P 500 has come long way since those lows in October, and a one year chart of the S&P 500 shows it now 121-points above its 50-day EMA. We saw that in December, and again on the 2nd of this month, but other than those, it is as extended as it has been in more than a year - almost 2 years actually, back before that January 2018 peak.




And the 200-day EMA is showing the same thing at +286-points, and that's even more exaggerated.




Again, there's no rule that stocks have to stop going up, but they will. They always do. The only question is when, and how much will they fall when they do stop going up? Can buy and holders grab another 5%, 10%, or more during this leg up, or are we nearing that maximum stretch point as the charts above may be indicating?




The S&P 500 (C-fund) made yet another new high yesterday and the bulls can be seen high-fiving each other, and why not? The angle of incline is impressive, as is the duration of the trend. The bears are left sitting on their hands waiting, with some capitulating, but they know that the longer this goes on without some kind of meaningful pullback (5% or more), the support gets very thin and the chances of a larger correction (10% or more) improve.




The DWCPF (S-fund) had been lagging a bit lately and yesterday it got a boost off of that longer-term rising support line. Impressive, but the overhead resistance is not far off as the squeeze continues here.




The EFA was up and the dollar was basically flat so we would get a decent gain here except, as we talked about in Monday's report, the I-fund may have been over-paid on Friday, so there was some give-backs on Monday compared to the return of the EFA.




The Dow Transportation Index looks great, and that bugs me. Being a leading index, the last thing I want to see while waiting for a buying opportunity, is the leader looking so good.




The weekly chart of the Transports is even more impressive. We were watching that huge bull flag several weeks ago, and it has since broken out and consolidated again, and seems to be headed toward the old 2018 highs (not 2019). It's a little surprising that this hasn't made a new all-time high yet given what's happened in most of the major stock indices.




The AGG (F-fund / bonds) was down slightly on the day as it seemed to be "risk on" for stocks, and that means some selling in bonds. However, with stocks flying as high as they are, it's a little surprising to see yields remaining as low as they have been, and when yields stay low, bond prices stay elevated so the AGG and F-fund are still near recent highs - and yes, that is a little surprising.




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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SPY (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
BND (F Fund) (delayed)

(Stockcharts.com Real-time)

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