TSP Talk Blog

Stocks were flat for most of the day on Tuesday, but late selling pushed the indices to their lows of the day at the close. The Dow lost 205-points and once again the Nasdaq was the high beta index as it doubled the loss of the the S&P 500. Small caps lagged the large caps and the I-fund may feel a little pressure after a rare positive day for the dollar yesterday.

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The negotiations between the democrats and republicans over the coronavirus relief continued, but no surprise - they are not close to a deal yet. That seemed to set the tone yesterday as investors feel the economy may suffer if there are any delays in getting the next stimulus package finalized.

Whether the sluggish action had anything to do with today's day two of the Fed's 2-day FOMC meeting, I don't know, but investors also expect the Fed to offer more in the way of cheap stimulus loans while acknowledging this summer's deteriorating economic situation as the virus continues to spread. No changes are expected to interest rates, but any policy changes could move the market.

Tomorrow after the bell Amazon, Apple, and Google report earnings, and if there are any individual stocks out there that can be market movers on earnings, these are probably the top three, and they all report on the same day. Since they report after the market closes on Thursday, things could get interesting on Friday.

The July seasonality chart shows us that the last two trading days in July, Thursday and Friday (30th and 31st), are positive 60% to nearly 70% of the time, so is that giving us any clues to what those reports will look like?


Chart provided courtesy of www.sentimentrader.com


After the bell yesterday AMD reported earnings and they were up 10% in after hours trading, so that could give a boost to those wild tech stocks today. Starbucks also beat estimates and was up over 5% after hours, and that could be a boost to consumer confidence, but a couple of other consumer related companies reported more disappointing reports.

So that's the main focus this week for stocks: Government stimulus, the Fed, and earnings from the FAANG companies.

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The S&P 500 (C-fund) failed to close back above that June high again, so it remains a sticky, stubborn level for the index. The good news is that it is holding above the 20-day EMA, so it's hard to get too bearish, but the bad news is it is also in the process of forming a small bear flag which could be a short-term issue if it breaks down.




The DWCPF (S-fund) also remains below the June high so it's clear there is selling pressure in that area. I see a small bear flag there as well, and that could be a precursor to an attempt to fill the open gap near 1430, but the larger cup and handle consolidation formation looks bullish overall even if we do see a pullback first.




The EFA (I-fund) is back below the June high so the theme is consistent across all three of our TSP fund charts.




The dollar finally had a positive day after 7 straight down days. There is an overhead open gap near 25.50 that may look to get filled, but the downside momentum could make it tough. Any rally in the dollar, even if temporary, could put pressure on stocks.




The VIX rallied 3% to 25.44 yesterday, which is off the recent lows, but still below the 200-day EMA, which it has closed below now for 10 straight days.




BND (bond ETF) inched higher again, remains in its narrow rising trading channel, but seems to be seeing a little more volatility as the day's trading ranges widen this week.




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

Tom Crowley



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