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TSP Talk: Choppy day below resistance

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Stocks posted modest gains yesterday in the big three indices as the Dow gained 52-points on a very choppy trading day on Wall Street. We saw some overhead resistance hold, but there was a clear bid for some stocks as we traded near those lows of the day. The Russell 2000 (small caps) was flat on the day but the broader Dow Completion Index (our S-fund) was down on the day.

Daily TSP Funds Return
The advance / decline numbers saw more issues down than up on both the NYSE and Nasdaq, but advancing / declining volume was in favor of the advancers, so again it was the more highly traded stocks that got most of the attention yesterday, and that showed with the Nasdaq 100 gaining 0.58%, and the S&P 500 gaining 0.30%, while the small caps (and the S-fund) were flat to down on the day.

The nimble may rewarded. This is a tough time of year for the stock market, and while October does have a reputation for some nasty market crashes, it's actually not a terrible month historically. That is, as long as it is not an election year.

This chart is a little messy but it's that blue line that I am focusing on. It's the average return for the S&P 500 during election years. You can see the negative sloping channel (orange) during September and October, but if you look a little closer you can see that there is a bit of a positive uptick starting very late in September, and perhaps going through the first couple of day in October. Then the lows get hit about week or so into October.

That's why I say you would have to be nimble, and after four weeks of declines and some short-term oversold indicators, perhaps there's a tiny window to make a little money in stocks in the coming days, if you have the ability to do so. With volatility so high recently, there's a good chance many of you don't have any IFT's left to trade this late in the month. That's fine. It's a tough time to be in stocks anyway.

The S&P 500 (C-fund) was up but it made another lower low, and a lower high, so the downtrend continued. We saw the bulls make a couple of attempts to push things higher, but things faded in the afternoon. However, the push into negative territory didn't last long so the bears may have run out of steam in the short-term. There's a solid level of support near 3200.

A closer look shows the Head and Shoulders pattern that I mentioned last week has actually reached its target level near about 3230. However the bear flag downside target is closer to 3060, but it would have to fall through the 200-day EMA (3136) to get that low.

The DWCPF (S-fund) fell through some key support on Thursday after closing below the 50-day EMA the prior day. That spinning top candlestick formation does tell us that the battle between the bulls and bears is getting more even, and that's one reason why the bulls could try to push back for a few days.

The EFA (I-fund) was down on the day again, and I'm actually surprised how close this is getting to its 200-day EMA already, after making a new high just last week. That's a lot of sideways action, which isn't a bad thing after the spring rally.

The High Yield Corporate Bond Fund also created a spinning top which could indicate a reversal soon, but can it do so with that open gap from July, and the 200-day EMA so close below?

BND (F-fund) was flat again and holding in its trading channel and below resistance and the 50-day EMA. If the channel is going to hold, we could see a move higher in the coming days.

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Thanks for reading. Have a great weekend!

Tom Crowley

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The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.

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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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