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TSP Talk: Another strong open fails

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It was another ugly negative reversal day for stocks yesterday after a strong morning rally fell apart, and the selling intensified into the close. The Dow ended the day down 411-points on concerns of Nancy Pelosi's 2-day deadline on reaching a stimulus deal before the election. So the chess game continues.

Daily TSP Funds Return

On the bright side, stocks rallied after hours on some positive stimulus news after Pelosi and Steve Mnuchin were scheduled to continue talks, then opened higher on Monday evening on top of that so the bears will have another shot today to sell what is shaping up to be another possible strong open on Tuesday. The NYSE internals were negative as we saw about 2 to 1 declining volume over advancing on the index. On the Nasdaq it was actually closer to even.

Stocks are obviously getting more sensitive to the stimulus negotiations, but I still think that there won't be a ton of selling unless a deal is completely off the table. The reason being is that investors will not want to be out of stocks when a deal is eventually reached. As skeptical as I have been, a deal should eventually be reached, but because of politics, it just may not happen until after the election. But after any kind of a deal, the question will be whether we'll get a sell the news reaction - particularly if stocks remain elevated when it happens.

I still think that the dollar will be our tell. If the dollar is falling, as it did on Monday's open, it means a deal may be getting closer and being priced in, but yesterday was a bit of an exception as the dollar fell early in anticipation of a deal, but closed well off the lows and stocks reversed down at the same time.




Earnings season is upon us and we will start getting some big companies reporting soon. Netflix reports today, Tesla and Chipolte tomorrow, Intel on Thursday, American Express on Friday - just to name a few of the hundreds that will be coming out this week. And next week gets even bigger as we'll see Apple, Microsoft, Amazon, Google , Facebook, etc., all reporting.




The S&P 500 (C-fund) did not look very healthy after another early rally was sold hard most of the day and into the close. It took 8-trading days, but the inverted head and shoulders pattern has now come back down to test the neckline again, something we saw as a possibility, and the bulls are looking for it to become support.




And here's that example chart again on how an inverted H&S pattern tends to play out. Clearly it's at a critical support area now.



The DWCPF (S-fund) has remained buoyant but continues to get swatted back every time it hits that 1680 area, which is starting to look like a flat top formation, which can be short-term bearish. On the other hand, it could be a bull flag forming. Time will tell.




The Dow Transportation Index actually poked its head up enough early on Monday to make another new high before it reversed down and now it is looking more like another flat top which again, isn't usually a good formation, although a bullish looking flag (blue) is still possible.




The EFA (I-fund) rallied higher in the morning to fill an open gap, then tanked into the close to fill yet another open gap (blue boxes.) The only open gap in the vicinity now is the one near 65.75 (red box.) The 50-day EMA is still holding since the rising trading channel broke.




BND (F-fund) was down sharply but rebounded to close off the lows after finding support at the old descending resistance line. It remains in that range we watched for months, and it closed below the 50-day EMA for a second straight day.




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

Tom Crowley




Posted daily at www.tsptalk.com/comments.php

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S&P500 (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
BND (F Fund) (delayed)

(Stockcharts.com Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes