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TSP Talk Market Commentary 01/15/2020

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Stocks opened lower on Tuesday but the dip buyers were right there to do what they do best... until the trade war crept in the picture again. Just after about 1PM ET we saw a headline that said something to the effect of, no tariffs would be rolled back until a second phase trade deal is stuck between the U.S. and China. Stocks fell from that point, but gyrated a bit into the close, closing mixed but off the lows.

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The Dow and small caps were up, while the Nasdaq and S&P 500 were down. The Transports had a big day as that chart hits a possible double top, the I-fund was on the flat side, and bonds were up.

Phase one of the Trade Deal with China is scheduled to be signed today, but a few hiccups got investors' attention, including that some tariffs will remain until at least Phase two is done.

We've been down this road before and things ended fine, but it might be a good excuse for investors to finally take some profits after the tremendous run over the last 3+ months. At some point we'll get a pullback but until support is broken on the charts, we can probably expect the dip buyers to be ready to jump in again. Once they feel some pain it might turn into something more severe, but until then, we should probably expect more of the same.

This is an options expiration week and also the the start of the busy earnings season so volumes could start to rise. The question is how investors will react to earnings. Will they pile on the good news, or have a "sell the news" reaction. Bad news probably won't be taken very well , and I'm not sure the market is prepared for that since the market stocks seem priced for only good things to happen at this point.

The S&P 500 (C-fund) was down slightly and remains near the middle of that rising red trading channel, but that blue wedge-like pattern may be acting as resistance. The bulls will likely stick around as long as the red channel remains intact, but earnings season and phase two trade headlines might have the ability to shake things up a bit.

The DWCPF (S-fund) looked to have broken out of that normally bearish looking rising wedge, but after the trade headline yesterday afternoon it fell back within the wedge, and that could be a concern as the wedge narrows.

The EFA / I-fund was up and poked its head above that consolidation area, and this is the second time that we've seen this chart test the top of that channel and rather than pullback, instead it has been moving mostly sideways allowing the support to come up to it. It looks like another leg higher wouldn't be a surprise, as long as that 69.25 area can hold here.

The Dow Transportation Index has had a great run off the December low, and since the October low which was near the bottom of a large trading range. Right now it is at the top of that range and possibly on the brink of a breakout if we don't see a double top pullback first. Because this area has been tested more than once, I suppose we can't call it a double top, and triple tops aren't generally as strong - meaning a breakout is more likely than at a double top. We'll see.

The AGG (F-fund / bonds) is still flirting with a breakout after a series of higher lows. Again, triple tops aren't usually as strong as double tops so a breakout here is very possible.

The weekly chart of the AGG (F-fund / bonds) is in a large bull flag, as we've pointed out before, but I went back a little further and not all bull flags are apparently bullish on this bond chart as we saw two break down instead of up. Hmmm.

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

Tom Crowley

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