TSP Talk Blog

Stocks opened sharply lower on Thursday morning as the overnight futures and opening bell emotional trading sent the indices reeling early, only to be bought up right away by the dip buyers or trading programs, or both, but the bears were able to put on just enough pressure to keep the indices slightly negative by the close. The Dow lost 128-points and was the laggard, while small caps led, holding onto some modest gains.

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Fridays have been rough for the stock market in 2020 with the last three being down and 5 of 6 this year. I have to assume a lot of that has to do with heading into the weekend with the coronavirus spreading.
In my Wednesday TSP Talk Plus report I said (no, really), "Mostly because of the coronavirus, Fridays have been rough on the market this year with the last three being down, and 5 of 6 in total down already in 2020, despite the decent start to the new year. With that pattern obvious to everyone, it could creep into Thursday."

If you can believe it, yesterday was the first negative Thursday for the S&P 500 since before Thanksgiving. 10 in a row were positive! Obviously that streak had to end sometime, but now the question is whether we get another down Friday, making it 4 in a row, and 6 of 7 this year?

It's tough to rely on one source but Guggenheim Global Chief Investment Officer Scott Minerd has put a number on the impact in China for the coronavirus. He said, even if the coronavirus stabilizes now, China's GDP could fall to a negative 6% for the year. That wouldn't be good, and sounds extreme, so are we to accept this? What about if the virus doesn't stabilize?

Despite the initial negative reaction to the coronavirus after a long holiday break, the Chinese stock market has actually climbed right back since and nearly filled that huge open gap, but yesterday it was down as it faced the 200-day EMA so it should be interesting going forward.




I still say the fear of the coronavirus will likely have more of an impact than the actual virus itself as far as the global economy goes, but either one can effectively cause a hiccup. If the Chinese GDP does actually go deeply negative for the year, the global economy will be negatively impacted. Obviously, with our indices at all-time highs, the wall of worry is being easily climbed.

Hey, we have another three day weekend! From www.tsp.gov: "Some financial markets will be closed on Monday, February 17 in observance of the Presidents' Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (February 17) will be processed Tuesday night (February 18), at Tuesday's closing share prices."

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The S&P 500 (C-fund) opened lower, rallied off the opening weakness to actually make a new all-time high, then faded into the close to end the day somewhere in the middle of the day's highs and lows. It is up against some longer-term resistance, which is rising, and some short-term rising support. It's hard to get too bearish here, but a move down to the old highs (blue horizontal line) wouldn't be a surprise.




The DWCPF (S-fund) had a big day leading the other indices, and in the process closed at a new highs. It too is a little stretch as it presses the upper resistance line of its recent trading channel, so there is some room below to the bottom of that channel, particularly if that open gap is going to be addressed.




The EFA (I-fund) was down sharply as the strength in the dollar has just been too much for it to keep up with the U.S. funds. Two gaps have been filled recently (blue) and two remain open (red), including one from yesterday.




The dollar's rally tends to put pressure on commodity prices but the recently beaten down copper market has been rallying all month despite the dollar's strength. The 20-day EMA could determine if this is a dead cat bounce, or a real low being made.




The price of oil was also up again but its having trouble recapturing $52, and now there's a descending resistance line right in the way. These two economically sensitive commodities are trying to make a move, and with the strong dollar it's more impressive than it looks, but it looks like it's make or break time for both.




The AGG (bonds / F-fund) got the bounce it needed to stay above that rising support line, but it wasn't overly impressive. I'd say today will be another good test.




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Thanks for reading. Have a great weekend!

Tom Crowley


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