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TSP Talk Market Commentary 02/11/2020

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Stocks opened lower on Monday, but the day's lows were basically that opening tick, and it was mostly a trek north for the rest of the day. With the weekend coronavirus nerves out of the way, and perhaps a strong jobs report buying lag, the Dow gained back 174-points of Friday's 277-point decline, while the S&P 500 and Nasdaq handily surpassed Friday's losses.

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The coronavirus has given the market something to worry about, but are we back in the climbing the wall of worry zone for the indices? There are certainly other things that could get our attention on the worry side such as the 10-year Treasury yield falling again to 1.55%, and another 3-month / 10-year yield inversion as the 3-month yield moved up to 1.58% yesterday.






We're also seeing some internal weakness again as large tech continues to steal the show and pull the indices up despite not a lot of participation from much of the S&P 500. Amazon and Microsoft were the winners again yesterday and if we add the gains from Apple and Google, we have a big gain in the Nasdaq, the Nasdaq 100, and the S&P 500. This is all happening despite the advance decline volume on the NYSE being fairly flat on the day.

My take is, the charts look very good and the Fed is being market friendly, but there are internal and indicator issues (NYSE McClellan Oscillator for one), along with a peculiar rally in the safety plays like bonds and gold while stocks are at new highs. In the past the charts and Fed have been the ones who have won out as the bulls have remained in control, mostly because of those market leaders, but at some point there will be a reversion to the norm. The question is when?





The S&P 500 (C-fund) busted back above that old high with a big day, but volume was quite light and a possible warnings sign, but as I mentioned above this may be how the wall of worry plays out. The action looks a whole lot like what we saw in December after that minor pullback, breakaway gaps, and a new breakout. That led to more good things for stocks back then, so as long as this chart remains above 3330, the bulls will likely remain in charge.




The DWCPF (S-fund) finally kept up with the large caps yesterday. The double bounce off the 50-day EMA is classic bull market action but this one still needs to make a new high before we can forget about a possible double top formation. The small bull flag (blue) may be increasing the chances of those new highs.




The price of oil fell back below $50 a barrel and below the lows making it vulnerable for a larger breakdown. If the large channel wants to stay intact there's a lot of room overhead for this to roam. The question is, do investors want lower oil prices to put more money in consumers' pockets, or will a breakdown scare investors into recession fears?




The EFA (I-fund) was up modestly as it continues to battle a strong dollar, which was up again yesterday.




The AGG (bonds / F-fund) made a new intraday high yesterday, but backed off and so we can't say that it has broken out. With the yield of the 10-yeear Treasury flirting with 2019 lows, this could be a place for a negative reversal, and I would think a breakout to the upside would have to get the stock market a little concerned.




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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