TSP Talk Blog

Mondays continue to be a good day for the stock market. The indices gapped higher after the good news on COVID vaccine progress and we saw the Dow jump 378-points. Apple continues to lead the way but yesterday we saw some of the broader indices and smaller companies climb aboard the upside momentum train. We saw new all-time highs in a few of the major indices, and if there were any negatives, it was that Apple and Tesla, the recent market leaders, may have started to flip.

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The progress report from President Trump on the COVID vaccine / therapeutics was certainly a key to yesterday's rally, so let's hope it's not just a campaign talking point. On the flip side, I'm a little surprised that the market ignored Joe Biden's comment over the weekend where he said, "I will shut down the country if scientists say so." And by the way, he's still leading in the polls so that makes the vaccine talk that much more important. I have a feeling the virus will become less of an issue after the election, and let's hope that's the case, just so we don't give someone like Dr. Fauci the ability to shut down the economy. The doctors will be fine, but there are a lot of folks out there who are hurting and just trying to get their lives back to normal now.

Just when I thought the internals were telling us this market is getting fatigued, we get a day like yesterday where the broader market soared, while the Nasdaq tech stocks rallied, but lagged the broader indices by about 1% for a change, despite Apple making another insane move higher. Here's the Equal Weighted S&P 500 index, which had been lagging.




The daily gains in Apple are now increasing the companies market capitalization (in a day) as much as other very large companies are worth in total, so this is starting to feel more like the dot com bubble again, but only in a handful of stocks.

Here's the recent rally in Apple, which is up tremendously this year, despite what we've been through so far in 2020. It did close well off its high yesterday, creating a negative reversal day, but it still gained 1.2%.




And if we go out 10 years, the recent action looks even more dramatic and unsustainable. Was yesterday's negative reversal a concern here?



The stock will split 4 for 1 at the end of the month and perhaps there's a run on the stock to get in before that happens, but will that trigger a "sell the news" afterward, or will it make it more affordable for even more people to buy it? I can't imagine.

Ok, now we'll see what the market can do as an encore after a big day following big news on the COVID front, with the possible negative reversal in Apple - and in Tesla by the way, the other stock that has gone parabolic.

I talk about these stocks because we basically have two choices: We can chase these leaders - and I say "these" figuratively with the assumption that if these stocks tumble, the rest of the market and the C, S, and I funds may come down with them. Or we can be patient and wait for the inevitable reality check. That may not come as quickly as we'd like which will keep those who are under-invested frustrated that much longer.

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The S&P 500 (C-fund) gapped up on another strong Monday for stocks. The chart is testing the upper part of the trading channel - nearing resistance, but that resistance is also rising at a decent rate. This is turning into an August to remember for the month that is normally considered one of the worst months of the year for stocks.




The DWCPF (S-fund) had a solid day after Friday's losses. Support continues to hold here and it seems to be behaving rather well.




The Dow Transportation Index did breakout of the bull flag that we have been following, so the trend continues. It is getting closer to its January all-time highs, which is at 11,359.




The EAFE (I-fund) had a big day and it may have been playing a little catch up after Friday's losses in the I-fund.




BND (Bond ETF / F-fund) started out on the upside very briefly on Monday, but the buying pressure in stocks had money moving out of bonds. That kept the bear flag alive and that's a little concerning for anyone in the F-fund. The F-fund got a decent price from the TSP yesterday so today's might now be as kind.




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

Tom Crowley


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