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TSP Talk: Stocks end historic quarter on bullish note

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Stocks finished a decent month, and an historic quarter, for stocks with another rally. The Dow gained a healthy 217-points, but it was held back by a big loss in Boeing. Meanwhile the broader indices saw nearly twice the percentage gains. FedEx was up sharply (+9%) after the bell yesterday after handily beating earnings estimates.

Daily TSP Funds Return
Rather than profit taking in the final minutes of trading of the best quarter in decades for stocks, it looks like the trading programs were pressing the upside and money mangers were padding their portfolios to be able to show winners in their quarterly reports.

Sometimes when they do that they sell the next day, and that can make the first trading day of a new month, or quarter, a little tricky. They have been a little tricky all year. June broke the streak but it took the final day of trading to do so, that is, the month's return ended up on the opposite side of the first trading day's gain or loss. So, a big day tomorrow, either up of down, could turn out to be a smoke screen for the rest of the month.



It's not rule, just a tendency this year. And coming off the last day of June and final day of the second quarter with a big rally does set the market up for some potential profit taking. Not that we can do anything about it now since we have our one day delays, but don't let today's action convince you of anything. Heading into a holiday makes even more messy with those potential holiday reversals.

Seasonally the first half of July is about as good as it gets as far as past performance goes, and this chart goes back 30 years. That doesn't mean every day will be positive, or that we'll see gains in the first half of the month. Those are just the averages, and typical behavior, and 2020 has been anything but typical.


Chart provided courtesy of www.sentimentrader.com


With Friday being the observed holiday day for Independence Day, we will get the June jobs report on Thursday July 2. Estimates are looking for a gain of 3.3 to 3.5 million jobs, and an unemployment rate of 13%. With numbers like that we are very vulnerable to big surprises on one side or the other.

The new L-funds start today and the L2020 fund is being incorporated into the L-Income Fund. I'll be incorporate these changes into the AutoTracker over the next few days so you could see some changes -- and delays. Sorry for any inconveniences.



The S&P 500 (C-fund) posted a second big day of gains for the week after convincingly bouncing off of those key moving averages. Yesterday's high however, hit the bottom of the rising trading channel and stalled. It had come a long way and breaking through that kind of resistance (old support) might have been too much to ask of the bulls in two days. But a new month? You never know on that first day.



We did see that golden cross with the 50 -day EMA moving back above the 200-day EMAs on the 15th, and while that is generally a bullish intermediate-term sign for stocks, it can often be a sign of being short-term overbought and you could see a pause or pullback, and that's basically what we've seen over the last three weeks before this week's rally.


The DWCPF (S-fund) had a good day and the chart has so far managed to hold above all of the key support levels, but it is up against some resistance and there's either a breakout coming, or a test of the lower end of the flag formation. Again, the first day of the month could see either happen.




The EFA (I-fund) lagged yesterday despite some weakness in the dollar. I did see red in some of the European indices, but that could reverse today after what happened in the U.S. markets yesterday.




The price of Copper and Lumber were jumping again, once again a mostly positive sign for the economy.




The yield on the 10-year Treasury opened lower yesterday but reversed up creating a positive reversal day. But, like the S&P 500 chart, it hit the old support line which acted as resistance yesterday.




The BND (bond ETF) was up but with the yield on the 10-year rallying yesterday, I don't think the F-fund will have done as well. They haven't posted Tuesday's prices yet as of this writing, but my guess is a flat to possibly negative day for the F-fund, based on those yields above.




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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)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
BND (F Fund) (delayed)

(Stockcharts.com Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes