TSP Talk Blog

Stocks were rocking and rolling yesterday and that started during the debate on Tuesday night with the futures gyrating wildly, but by the close the Dow had a solid gain of 329-points. There was some optimistic statements from Treasury Secretary Mnuchin regarding the stimulus negations yesterday and the market rallied hard after hearing that, but no deal was reached and we saw some selling in afternoon trading to take the indices off their highs.

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The futures on Tuesday night, the night of the debate, were rallying strongly during the debate, fell sharply after the debate, and then were flat heading into the opening bell so it was likely that we were going to see a wild day of trading, and that was the case, but the bulls had the advantage despite the S&P 500 closing 31-points off its high, and the Dow closed 244-points off its high.

The high in the S&P 500 yesterday, coincidentally or not, coincided with the February high before it backed off.




It was also the end of the 3rd quarter yesterday, and the first monthly loss for the S&P 500 since March. Being the end of a quarter, there was a lot of late finagling and the S&P 500 futures actually dropped about a dozen points in the minutes after the closing bell yesterday. Being a good quarter for stocks overall, perhaps money managers wanted to show more long exposure to the market in their quarterly report than they actually wanted? Just speculation of course, but why else would you hit the sell button seconds after the closing bell when they had all day to do so? And of course they did sell the morning rally pretty hard later in the day so it felt like a lot of jockeying for position and perhaps window dressing for those reports, so maybe we shouldn't read too much into it.

In the early action when the indices were near their highs yesterday, the NYSE advance / decline volume ratio was about 8 to 1 in favor of advancing volume, but it didn't hold up and we saw a more modest ratio of just over 2 to 1 by the close. And the advance / decline issues ratio was only about 8 to 7 in favor of advancers. The Nasdaq A/D numbers were similar.


Chart provided courtesy of www.sentimentrader.com


October is an earnings month for stocks but we still have a couple of weeks before the bulk of them get released.

We will get the September jobs report on Friday and estimates are looking for a gain of 800,000 jobs, and an unemployment rate of 8.2%.

For now, the market is on stimulus watch. News of a deal, or no deal, will likely be the main catalyst for the next few days.

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The S&P 500 (C-fund) opened higher and really took off into the early afternoon, and the chart filled the open gap near 3380, and then some, before it started to pull back. Now the only open gap in the vicinity is down near 3305. It did close above the 50-day EMA by six points yesterday, so that's one barrier it passed, but as I said above, that February high seemed to have some kind of impact on the upside.




The DWCPF (S-fund) was up moderately and did well despite some struggles in the Russell 2000. You can see that the top of that trading channel was an issue, and the large open gap below is still looming.




The EFA (I-fund) was down on the day and it fell back below the 50-day EMA and may also be eying that large open gap below. The breakdown from the trading channel was a warning, as is the 50-day EMA breaking, but so far that 200-day EMA has held as solid support.




The Dow Transportation Index was down quite a bit yesterday as that overhead resistance was too much for it, even on a very good day for the broader market. This could be a head and shoulders formation so watch that 11,080 area or so - maybe 11,000 - for an important test of support which would be the neckline of the H&S formation.




The VIX was up slightly, which is not something you'd expect on a day that the Dow gains over 300-points, so the pre-election activity still has investors expecting moderate volatility over the next month.




BND (F-fund) tested and held the lower end of the range that we have been watching. After one day above it, BND closed back below the 50-day EMA as bond yields rallied yesterday.




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

Tom Crowley



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