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TSP Talk: Stocks rebound from morning losses. Tech rallies after hours

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Stocks opened sharply lower on Thursday as the highly anticipated shock GDP report was finally a reality, but mostly expected, and the lows of the day were printed shortly after the opening bell. The Dow lost 226-points, while the broader indices were mixed with the Nasdaq back in the lead with a moderate gain, and modest losses in the S&P and small cap indices.

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It felt like the losses early on Thursday were a smoke screen as the headlines were talking about GDP and initial jobless claims, but in fact the futures were significantly lower overnight before those economic reports even came out. And, once the market opened, we saw the dip buyers step up pretty quickly.

The GDP came in at -32.5%, better than the -35% that was expected, and the initial jobless claims came in fairly close to estimates, so if there was any selling on these numbers, it may have been a fear factor and not an understanding that estimates were so low already.

I'm not sure why I didn't notice this, but not only did Apple, Amazon, and Google report after the bell yesterday as I had been anticipating, but Facebook reported as well. So 4 of the 5 FAANG companies reported in one day.

I am writing this just after the bell while these reports are coming out and so far everything looks positive with beats all around. Amazon was up over $180 a share or about 6%, Google was up over 1%, Facebook +8%, so barring any significant changes during the conference calls, the Nasdaq 100 should do quite well today, and that should spill into the rest of the indices. Update: Apple reported a large beat and also a 4 for 1 stock split, something we don't see much anymore these days. The stock was up about 5% after hours.

The danger of course is a possible "sell the news" reaction after an opening pop higher with some of these stocks up dramatically already this year before these rallies. But these reports appear to be signs of relief from investors so far. So much for this week's congressional hearings scaring investors in these stocks.

We came into Thursday saying, "...with the indices on the verge of a testing overhead resistance, we have a setup for either a major breakout, or a significant double top pullback from those reports." We saw a sell off early but a decent positive reversal into the close, despite the losses on the day. After the bell however, the S&P 500 (C-fund) futures were once again flirting with a breakout as the tech earnings hit the wire. The moving averages continue to hold on pullbacks, and that's always a good sign.

The DWCPF (S-fund) rebounded strongly and closed with just a small loss, but it is actually the second highest closing price since February. Assuming the futures gains hold overnight, we could easily see a breakout here on Friday, above that July high.

The Nasdaq 100 continues to be the market leader and after those FAANG earnings reports yesterday, this chart is likely to be flirting with, if not breaking out from, that big bull flag that has formed in July. That red candlestick below is my drawing of what I was seeing Thursday evening in the futures market.

The EFA (I-fund) shows a big loss, but I doubt that is what we'll see in the I-fund (the price hasn't been posted yet as of this writing.) With the late rally in U.S. stocks, and the decline in the dollar, I assume the TSP will do better than a 1.48% loss.

The dollar rallied early, but closed down sharply again helping keep stocks somewhat buoyant, despite some modest loss yesterday.

BND (bond ETF) -- nothing seems to be able to knock it off its pedestal. The trend remains intact.

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Thanks for reading. Have a great weekend!

Tom Crowley

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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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BND (F Fund) (delayed)

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