TSP Talk Blog

Stocks were mixed and relatively flat yesterday with the Dow and Nasdaq hanging onto small gains, while the S&P 500 and small caps gave up all of their gains after a late afternoon reversal down. The Dow gained 12-points and while the market is focused on the earnings that are flooding in, they are also paying attention to bond yields that may be indicating an economic slowdown is possible, especially with the coronavirus scare this week.

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We saw several of the open gaps that we talked about yesterday, get filled on the charts, and they did turn out to be support or resistance, depending on where the gap was on the chart, and that triggered the reversals.

Dow component Apple gained 2% yesterday after posting earnings, and that helped the three major indices, the Dow, S&P 500, and Nasdaq, outperform yesterday despite slipping late in the day, while the broader indices like the NYSE (-0.24%) and the Russell 2000 (-0.55%) were down on the day.

Yesterday after the bell we saw Facebook getting hit hard but another major Dow component, Microsoft, rallied 3% after hours after they beat earnings estimates, so those top three indices could outperform again today. The question is, will the broader market tell a different story again?

Tesla posted huge earnings after the bell and the stock was up 12%, and PayPal was down sharply. Neither are big market movers and the battle today may be between the these smaller companies and the economic nervousness vs. the bellwether blowout from Microsoft, which is a widely held market mover.

The yield on the 10-year treasury was down again (bond prices up) and that is a little concerning with stocks still near all time highs and this smart money group of bond traders and investors are buying up bonds while it goes fairly unnoticed by mom and pop stock market investors. Gold has also been on the rise indicating more safety trading going on behind the scenes.




The Fed didn't give us any surprises on Wednesday so their FOMC meeting was kind of a non-event, although it's interesting that stocks peaked right at the end of their meeting after they did say the coronavirus could impact the Chinese economy in the short-term.

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The S&P 500 (C-fund) rallied early but faded late to close down on the day. It remains above the 20-day EMA and that key rising support line, which is the bottom of that 4 month long rising trading channel.




The interesting thing that happened yesterday was how the S&P 500 did what we talked about in yesterday's commentary, which was mirror the January / February 2018 peak and correction, with the 1.5 day rebound off the initial low, although not to the same scale. And with Apple's earnings being the top back then, yesterday's rally in Apple wasn't enough to push the S&P over the finish line in the green. Perhaps Microsoft will save it from what happened in February 2018 after that 1.5 day rebound.




The DWCPF (S-fund) also had a negative reversal day but this one happened below the old support line. That's the level that we need to watch in case it is going to turn into resistance.




The Dow Transportation Index was up big early on Wednesday and broke back above its support line, but reversed hard to the downside and failed to hold that break. So it lingers below support, but held onto enough of a gain to close above the 50-day EMA.




The EFA (I-fund) was flat on the day after giving up its modest early gains, but that kept it above the 50-day EMA for another day as it eyes that large overhead open gap.




The price of economically sensitive oil and copper moved lower yet again as oil looks to be making another bearish looking flag, and copper is just in all out free fall lately after giving back all of its gains since early October.




The AGG (bonds / F-fund) had another big day after Tuesday's dip that didn't even fill its open gap. It's at the top of that new rising trading channel, so a little slowdown is possible, but the support is rising fast as well. The problem here is that bonds are getting on the overbought side in the short-term and only fear may keep them going.




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

Tom Crowley



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