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TSP Talk Market Commentary 02/12/2020

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Stocks rallied early then faded a bit on Tuesday partly because of the Fed in Washington. The indices did close mostly higher, although the Dow was flat, but it was a negative reversal day and that could indicate some short-term issues for the market.

Daily TSP Funds Return

Last Friday's sell-off seemed reactionary where Tuesday's fade felt more like fatigue, possible triggered by Jerome Powell who spoke in front of the House Financial Services Committee. He had some good things to say about the economy in general, but also said it was too early to say how the coronavirus will impact the economy. Apparently investors were hoping Powell would be more dismissive of the virus's potential because stocks started to weaken during his testimony.

So far the October low in yields (10-year) have held after a move higher yesterday (bond prices down), and a possible higher low was made yesterday, but clearly this is still in a downtrend. Lower yields are generally an indication of weakness in the economy, but as we talked about before, if bond yields and cash are not paying much, where else will investors put their money but stocks? The only thing that might change that is a shock in the stock market - something we haven't seen since December of 2018 when the Fed was still raising interest rates.




The price of oil was up slightly but it is still below $50 and causing some concern. Is it the economy? Is it Telsa's recent success? The other very economically sensitive commodity that we watch is copper, and while it had bounced off the recent lows, it may be creating a bear flag.




So we're in a spot where we have seen some signs of a slowdown in the economy, and of course the coronavirus is still an issue that could have its impact, but stocks are at news highs and seemingly uninterested in that news. Can that continue?



The S&P 500 (C-fund) rallied to new highs again yesterday, but perhaps hinting of a turnaround Tuesday, we saw some big early gains fade into the close. There's resistance overhead but the breakout above the January high didn't seem to be a problem on Monday, so we'll see. At this point any dip probably needs to hold above that blue line or a failed breakout could send investors into profit taking mode.




The DWCPF (S-fund) led on the upside for the first time in a while, as the big names like Apple and Microsoft finally took a day off. The problem is there was a minor failed breakout and the morning highs could not hold into the close. Those gaps below remain open and the questions is whether they'll remain the "gap and go" variety, or if they'll need to be filled before things go any higher.




The EFA (I-fund) was up and the dollar finally paused so we saw a decent day for the I-fund.




The Volatility Index fell below the 200-day EMA in early trading but reversed up closing back above it and near the day's high. It did fall below that rising support line which could act as resistance now, but that line is rising.




The AGG (bonds / F-fund) pulled back after Monday's negative reversal and failed breakout. There's rising support at the bottom of that blue rising trading channel, and an open gap below 114, so those could be potential short-term pullback targets.




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.

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SPY (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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AGG (F Fund) (delayed)

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