TSP Talk Blog

Stocks rallied again on Thursdays on very little news, but the charts have been improving and the technicians are seeing that. The Dow gained 122-points, while the S&P 500 (C-fund) and small caps (S-fund) led on the upside. Bonds posted a good day as they try to come back from recent lows.

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There was no progress on the stimulus front, but investors didn't seem to care. After President Trump said there would be no negotiations until after the election, which of course sent stocks reeling on Tuesday afternoon, he has offered a couple of stand-alone deals for individuals payouts, and another for the airlines, but they are not being embraced by congress. The fact that he's still talking about it may be all that the market cares about, assuming a deal will eventually be made.

It was another healthy day for the internals with advancing issues easily outpacing declining issues, and advancing volume crushing declining volume by more than 5 to 1 again on the NYSE, and new highs outnumbering new lows by more than 10 to 1. The Nasdaq was not quite as impressive, but still very positive.




And speaking of the Nasdaq, the chart of the large tech index may be ready to pop again, breaking out of a bull flag, which is part of the inverted head and shoulders pattern.




And the reason that is important is because they had been lagging a bit, which also weighed on the S&P 500 while small caps have exploded. If those large tech stocks can join the party again, there will be more fuel for an overall rally. Of course big tech is in some hot water in Washington right now so perhaps it won't be as easy as that bull flag breakout suggests?

Monday is Columbus Day and the stock market is open, but because it's a federal holiday, the TSP will not be processing transactions. Anything input for Monday will not be processed until Tuesday. Also, my next commentary will be posted on Tuesday.

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The S&P 500 (C-fund) broke above the neckline of its very clean looking inverted head an shoulders pattern yesterday. This particular pattern has a technical upside target of about 3525, but that doesn't mean it has to go straight up to that level. Breakouts like this can rally, pullback to the neckline, then rally again - assuming it holds.




Kind of like this...



The DWCPF (S-fund) continues to lead the way higher after the breakout. It has gone virtually straight up since the low on September 24th, and at some point it is going to take a breather. But small caps can be explosive when they get hot, so any pullback could be supported by the breakout level and / or the bottom of its current channel. Those open gaps are still there for everyone to see.




The EFA (I-fund) rallied and moved above the top of that old open gap, so that's a plus, but there could be some resistance near 65.50.




The price of oil enjoyed a 3% rally on Thursday, and it has had a nice run up since successfully testing the September lows. It's up against the 200-day EMA again so it will be tested going forward.




That brings us to another sector that hasn't been coming along for the ride until recently. Energy stocks have gone been sinking for months after a nice rally in the spring. The trend is down but it did break above its shorter-term descending resistance line (red) yesterday, while the 50-day EMA and the larger descending resistance line looms above. But if this can ever break that downtrend, it may tell us more about the prospects for a strong economic recovery. So far it appears timid to join in on that party.




BND (F-fund) rallied off the recent lows and the action looks like it wants to reverse higher. Not that it will break out of its range to the upside, but it looks beaten down and ready for perhaps a dead cat bounce.




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Thanks for reading. Have a great holiday weekend! We'll see you on Tuesday.

Tom Crowley



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