TSP Talk Blog

Stocks opened slightly lower on Thursday after the overnight futures scare on the election interference news. However, a nice positive reversal sent the indices higher, closing near the highs of the day. The Dow gained 153-points, about the same percentage as the S&P 500, while the Nasdaq lagged and small caps soared. Bonds were hit hard as yields hit a 4-month high.

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Despite the uncertainty in Washington, the charts have been drawing us a pretty good picture of the technical setup, which on the surface looks good. We have the make up for a breakout in some charts. The question is whether the chart are predicting the news, or if the news will spoil the good chart set ups.

The internals were strong on Thursday - particularly on the NYSE with advancing volume leading declining by about 4 to 1.




The the Equal Weighted S&P 500 Index had a big day at +1.26%, and the bull flag looks ready to breakout.




We got a four month high in the yield on the 10-year Treasury, sinking bond prices to nearly a 5 month low. There was an open gap near 0.86% from back in June, and that may have been the target for this run, but it may also like to test that June high as well.




Rising yields helped the banks yesterday as the Bank Index broke out of its inverted head and shoulders pattern - something the S&P 500 did more than two weeks ago. It also closed above the 200-day EMA for the first time since February.




That's also one of the reasons that the small caps did so well yesterday. The Russell 2000 has a ton of small bank stocks in it.

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The S&P 500 (C-fund) behaved rather nicely yesterday, as far as technical analysis goes. The neckline of the inverted head and shoulders pattern was tested and held again on Thursday, then reversed higher. It hasn't broken above its descending resistance line yet, but since that looks like a bull flag (red) the odds favor a breakout to the upside eventually.




I will leave this up while this inverted H&S pattern continues to play out.


The DWCPF (S-fund) had a big day gaining over 1% on the day, and as I mentioned above, the smaller banks in the index provided much of the boost. The prior September high held as support at Thursday's low.




The EFA (I-fund) had a nice reversal day as well, but because the dollar bounced back, it lagged the U.S. indices. Plus there was some fair value to pay in the I-fund after Wednesday's over pricing.




The dollar had broken down on Wednesday and created an open gap, and on Thursday that gap was filled already, and the neckline of that head and shoulders pattern held as resistance.




With yields on the rise, BND (F-fund) broke down yesterday closing at its lowest level since early July.




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Thanks for reading. Have a great weekend!

Tom Crowley


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