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Busy week coming with riots, China, and jobs report

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The week ended with some fireworks late Friday after President Trump addressed the status of U.S. - China relations. The market may have been expecting a more hawkish tone from Trump, but ultimately the fact that the trade deal remained intact for now, and no sanctions were announced, was seen as bullish and the FOMO kicked in late Friday after we've had a series of strong Monday's (Tuesday for the holiday week) for stocks. Of course the issues with China are not going away and the weekend was filled with less than positive news. The question is whether it was more political and social negatives than financial. The Dow closed down 18-points while the other indices closed mixed on Friday.

Daily TSP Funds Return
The Russell 2000 was down on the day but the midcaps did well helping the S-fund to a day of gains, despite Thursday's nasty negative reversal. The I-fund was adjusted down after Thursday's large overpayment having to do with the late negative reversal in U.S. stocks on that day.

The May jobs report comes out on Friday morning this week and consensus estimates are looking for a loss of 8.5 million jobs although I see some estimates as high 12 million, which is giant difference, but at least it's smaller than last month's more than 20 million. The unemployment rate estimate is about 20% -- yes 20%, a sharp jump from last months 14.7%.

So while we see stocks continuing to bounce back, the economic numbers are still quite shaky. There is a light at the end of the tunnel as far as opening up the economy goes, but then came the protests over the weekend, which turned into riots in some cities, and that could be a slight economic set back.

The bond market isn't overly convinced that the economy is dong better, or will be, as the yield on the 10-year Treasury Note fell sharply on Friday and it remains below 0.75% and the 50-day EMA, and near recent lows. The lower yields help the bond market and the F-fund ended Friday with a relative large gain.

The unrest in cities across the county may steal the headlines and that may keep China out of the top headlines, and that may actually help stocks, but as we said above the unrest may also have a negative impact on the economy and investors may be less aggressive due to the uncertainty, which the market really dislikes.

The futures market hasn't opened yet as of this writing but I'm sure curious to see how the market reacts to this weekend's activity across the country.

The S&P 500 (C-fund) broke above the 200-dy EMA a couple of weeks ago, so we started to focus on the 200-day SMA (simple average) knowing many investors were watching it, but the bulls have now been able to close the S&P above that average for 3 straight days. That's pretty impressive although some of the broader market indices aren't quite showing this same strength yet. The open gap near 2860 is an obvious target for any pullback and there are two other open gaps further down on the chart that may take more time to get filled, but being due for a dip given the weak economic data, that first gap near the 50-day EMA has my attention.

The DWCPF (S-fund) outperformed its sibling Russell 2000, which was down, on Friday and seems to be testing the bottom of that rising trading channel again, and the 200-day EMA (blue) may also try to act as support, now that it is above it. It did close below the 200-day SMA (orange) again after just one close above the line on Wednesday last week.

The Dow Transportation Index hit some resistance in the latter half of the week last week and may be getting ready to pull back from the top of that blue rising trading channel.

The EFA (I-fund) is in a similar situation having stalled at the top of the rising channel as well as the 200-day EMA. Large open gaps remain apparent.

The weak dollar helped the I-fund out-perform all of the other TSP Funds last week, but it may be trying to find some support at the 200-day EMA. If the dollar does have some kind of relief rally this week, the I-fund may turn out to be a laggard.

The BND (F-fund) had a big day on Friday, as far as moves in the bond market go. This was the second close above the early March closing high, and now the only thing in the way resistance-wise, may be the March intraday high near 89.

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

Tom Crowley

Posted daily at TSP Talk - Market Commentary

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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