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TSP Talk: Trump news and jobs report shake up stocks

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Stocks opened sharply lower on Friday after the news of President Trump testing positive for the coronavirus. The Dow lost 134-points, which was 300-points off the low of the day, but we did see the midday rally fade as we headed into the close and the Dow closed 200-points off the highs, so it was a volatile day with the indices closing near the middle of the day's range. The Nasdaq was a different story with a sharp 2% loss, while small caps held up well, and the Transports bucked the trend and closed with a 0.77% gain.

Daily TSP Funds Return
The losses on Friday shaved some gains off the weekly return, but the C, S, and I funds all ended the week with positive returns (+1.54%, +4.06%, +1.55% respectively) ending the 4-week losing streak for the S&P 500.

Though most of the indices were down, you might be surprised to see how well stocks did internally. The NYSE actually ended Friday with more issues higher than lower, twice as much advancing volume than declining, and many more new highs than new lows. The Nasdaq wasn't as strong, but the even with the 2.2% loss on Friday, the advance/decline ratios weren't too bad, and there were more new highs than lows.

The Equal Weight S&P 500 was actually up moderately on Friday and closed at its highest level since September 18.

The indices were a little tentative going into the weekend given the question over the President's condition, so it will be interesting to see how investors react on Monday after having a couple of days to process what happened and what it will mean going forward.

The chances of a stimulus deal being made may have been heightened after this incident, but that raises my expectations of a deal from very low, to a moderate possibility.

The S&P 500 (C-fund) opened lower and almost filled the open gap at 3307, but the 50-day EMA did its job by holding as support. The inverted head and shoulders pattern, which we talked about on Friday, seems to be filling in that right shoulder. There could be more downside to go if that gap is going to get fully filled, but inverted H&S patterns do tend to break to the upside. That may only be if we are considered in an uptrend, which is questionable after September's correction.

I was a little concerned about the negative reversal candlestick on the weekly chart, but...

... I went back this year and saw that they weren't really a problem in the following week. The red arrows might be considered negative reversals on this year to date weekly chart but the S&P 500 seemed to do fine in the week following that negative reversal candlestick.

The DWCPF (S-fund) nearly erased all of its morning losses but fell short after hitting the prior highs. The gap below is quite large and always a concern since they do tend to eventually get filled. So the action is positive, but there's an opening for the bears if they want it.

The EFA (I-fund) fell sharply early, just about filled the open gap below (blue), then rallied to close near the highs of the day. It closed right on the 50-day EMA.

The Dow Transportation Index was up nicely on the day but still has some issues on the chart. Support held just above 11,000 but it still remains below a couple of key levels of resistance. It does look like a head and shoulders pattern which can be tricky in an uptrend. They can be continuation patterns, which means the upside would continue, or they could be topping formations, but usually it's the very large head and shoulders patterns that become tops, like on a weekly chart. This one is on the smaller side.

BND (F-fund) was down on Friday, which is interesting since you'd expect a geopolitical event to lower bond yields (which go up when bond prices go down), but they went up. The chart remains in that stubborn trading range.

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

Tom Crowley

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