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TSP Talk: Stocks stay positive despite weakness in Apple, Banks, and Energy

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Stocks opened higher on Tuesday but faded later after some selling in Apple, which has become such a big part of the big three indices. The Dow, which was up about 240-point near the opening bell, lost all of those early gains and closed basically flat at +2. The Nasdaq held onto a strong gain, while the broader indices saw gains but also faded in afternoon trading.

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Being that Apple is such a big piece of the Dow, Nasdaq, and S&P 500 indices, its decline midday yesterday was one of the catalysts that took the market indices off their highs. This intraday chart shows it opened over 118 and hit 118.83 just after the open, but you can see there was a sell the news reaction at about 1 PM ET to Apple' announcement of its new Apple Watch, iPad, and subscriptions services. A late rally off the lows pushed it to a slight gain on the day, and that helped the indices, particularly the Dow, stay positive.

Apple was a big part of the day's story, and always worth keeping an eye on, but other obstacles for the market yesterday were the financials and the energy sector. Banks took a beating yesterday , and despite oil rallying, energy stocks were down dragging on the S&P 500 and the Russell 2000 index, which contain a lot of small banks and oil refineries companies. The good news, the weakness in the Russell 2000 didn't hurt the S-fund all that much. There are actually 2500 more stocks in the S-fund than in the Russell 2000 Index, and that made a big difference.

So, yesterday saw a nice early rally for stocks, but an afternoon fade near the top of an important trading range may have raised some concerns. But just the fact that we saw solid gains in the C, S, and I funds yesterday shows that the market may want to go higher despite those obstacles. Investors had several excuses to sell yesterday but they held up for the most part.

After the bell yesterday, FedEx reported a blow out earnings report which should send the Dow Transportation Index to new all-time highs, and that's good news for the broader market.

Today will be day two of a two-day FMC meeting. No changes to interest rates are expected, but of course anytime Powell talks, the market is on its toes, and waiting to hear any key policy wording changes.

The S&P 500 (C-fund) ran up to the top of the current trading range and stalled, so that's a concern, but there wasn't an all out sell-off, which could have been the case, and something we might have seen last March. It closed above that key 3400 level, but just barely so the bulls would like to see some follow through buying again today to break that barrier. As we talked about yesterday, there is a possible gap that could get filled down to Friday's closing price of 3341. I'm keeping an open mind to that possibility, but I did like the action yesterday.

The DWCPF (S-fund) had a nice day but like the S&P 500, closed off its highs and created a spinning top which is a possible reversal pattern. But being above the 50-day EMA in a bull market after a successful test, I give the bulls the advantage here.

The Dow Transportation Index hit a new all-time high yesterday - also closing at a new high. FedEx reported huge readings after the bell and that will certainly confirm a breakout, although there's always the possibility of a "sell the news" reaction because the stock has run up like 40% in recent months coming into this report, so investors were expecting something good.

The EFA (I-fund) flirted again with a breakout yesterday as it hit the old highs again, but dipped back with the rest of the market late. It did have a nice gain, but the dollar was down early and closed higher, and that also contributed to the late weakness.

The Retail Index has been a surprising winner this year being up 40% in 2020 (yes, despite COVID). Yesterday it gained 1.43%, and while it has been in a pullback that may be looking like a bear flag, the 50-day EMA is holding on this very bullish index and I'd be surprised if it breaks down. This is telling us a lot about the economy.

BND (F-fund) has been trading in a range for several weeks now but to me it's hard to tell which way it wants to break. A move to the upside would mean yields would drop, and I'm not sure that is a reasonable expectation - that is unless this economic recovery is about to fail. If I had to guess, and I'm often wrong with bonds, I think this chart is more likely to eventually break down (yields move up.)

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

Tom Crowley

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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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