TSP Talk Blog

Stock were mostly higher yesterday but the Dow was down mainly because of Apple, for once, which did not participate in the rally. The S&P 500, Nasdaq, and small caps were all up comfortably, with those tech stocks leading the way despite Apple's weakness because stocks like Amazon and Microsoft took the lead. Bonds pulled back.

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Like Monday, stocks rallied into the close on Tuesday, and that was after a rocky up and down morning for stocks, but it was not a Turnaround Tuesday by any means The bulls took charge after lunch and never looked back.

Of course I have to dive in a little deeper to see if there was anything under the surface that we should be worried about, and yes, the Equal Weighted S&P 500 index was not up yesterday. Compare that to the Nasdaq 100 index chart below that and with up vs. down issues being about even on the day, we see that it is still the few that keep lifting up the indices.




Bonds had an interesting day as yields popped early on the strong housing data, and that pushed the 10-year yield above the resistance line and back above 0.70%, but it didn't hold into the close and the yield settled back at 0.68% and below that resistance, so with the negative reversal day and the open gap, it will be interesting to see how that follows up today.




It's tough to fight the bulls here and their momentum, and at this point if you're bearish you're fighting what the indices are doing, but many indicators and divergences in the broader indices do give the bears some fodder for a possible imminent pullback. The question is how long will it take for the freight train to come to a stop and change course into reverse?

The market / investors are watching the potential vaccine progress and the elusive stimulus that should eventually come, and that may keep the bears away for longer than they'd like to be.

We also have a Fed whose balance sheet is growing faster than Jim Cramer can say, "buy, buy, buy", so we may need to hear some bad news before things change. That's a good thing if you're in stocks, but potentially scary once that bad news comes out and potentially takes the air out of the balloon with a bang.

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The S&P 500 (C-fund) moved higher on Tuesday making it three in a row, and 5 of the last 6 days. There was a gap opened on Monday morning, and it remains open and, being within the rising trading channel, that is typically a potential target for any pullback this week. The problem for the bears is, Mondays have been very strong during this recovery, and two Monday morning gaps remain open - just since May.




The DWCPF (S-fund) was up again and it closed well off the lows for a second straight day, so there seems to be a bid under the small caps market. There is some support that is being tested daily, and at some point that could fail if it keeps getting tested, but there's another support line not too far below that.




The EFA (I-fund) was up slightly as the afternoon rally in the U.S. didn't help the Asian and European markets, but the TSP make take that into consideration when pricing the I-fund on Tuesday.




BND (Bond ETF / F-fund) gapped down lower and the bear flag broke down as we were suspecting it could. What I didn't expect was a positive reversal day, but I suppose the 50-day EMA wasn't going to be completely ignored. There is a small open gap still above 88.6 that could get filled in the short-term, but can it crawl back within that flag?




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

Tom Crowley


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