TSP Talk Blog

It was a slow summer Friday for stocks as trading volume was down and the indices were fairly flat, trading in a narrow range. The Dow rallied late to push into positive territory while the S&P 500 came up just short. The S&P 500 also continues to come up short in pursuit of making a new high, but the bears have failed to do anything about it as the index hangs just under that February high.

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The indices have remained buoyant although we have seen some internal issues with some of the broader indices still lagging the high flying Nasdaq. Even with Apple and Microsoft as components, the Dow is still about 1600-points below its February highs and, as we've noted several times, the equal weighted S&P 500 index (RSP below) is in a similar situation - finding some resistance at an old resistance line from prior significant peaks.



Both charts are in a quasi megaphone pattern with a lot of room below if they can't breakout like the FAANG heavy S&P 500 and Nasdaq charts have already done.

That's the concern on Wall Street recently. That is, that we are starting to see some possible weakness from those large tech stocks which have really been the catalysts to the rally.

With earnings season winding down, the second half of August can get a little quiet and as we said, trading volume has already started falling off. Normally a dull market is tough to take down, but with the economic recovery being such a major concern in this COVID environment, lower trading volume can lead to some larger swings when data or news is released, and the indices can be pushed around a little more than normal.

The Sunday evening futures are looking perky and perhaps want to breakout, but emotional Monday morning openings can't always be trusted.

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The S&P 500 (C-fund) has been grinding higher but not yet able to break through the February highs that I, and the media, have been obsessing over. It's such a critical pivot point for stocks so it's really the biggest question on everyone's mind right now -- double top or breakout? You can see the trading volume sliding lower at the end of the week, and it was the lightest volume day since February.




The weekly chart shows the massive rally off the lows, and the double top obstacle in the way of new highs.




The DWCPF (S-fund) is looking just fine here but it has flattened out. Flat tops can be bearish, but it could also be pausing to gain strength for an attempt at another push higher.




The EAFE was down moderately on Friday, lagging the other indices, and you can see where that decline landed it -- right on top of a double dose of support that could be critical for the next short-term direction. The dollar's weakness has helped it become the leader of TSP funds over the last week, and for the month of August.




The yield on the 10-year Treasury has been popping higher since the jobs report on the 7th. Ironically, the pop in yields in June came before that month's jobs report, and fell after it was released.




BND (Bond ETF / F-fund) has been falling as yields rise, as you would expect, and now the broken rising trend is turning to the 50-day EMA for support after losing a month's worth of gains in a week.




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

Tom Crowley


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