TSP Talk Blog

Stocks start the new week very similarly to how it started last week. The only difference may have been that last Monday the indices closed near their lows of the day where yesterday we actually did some some buying into the close, but it was a very negative day nonetheless. The S&P 500 lost 64-points, and last Monday it was -57. The Dow lost 650-points - more than 300 off the low of the day. Perhaps the good news from last week was that the sell off on Monday the 19th turned out to be the lowest close of the week.


I have to admit that I did not see that coming. The charts looked good. The set ups were there, but the market finally seemed to relent to the recently rising COVID cases. At least that's the theory. Could it be nerves in front of the huge earnings week? Maybe, but as we talked about yesterday, this could be a "sell the rumor, buy the news" set up - that is unless my paranoid theory turns out to be true, which I'll talk about below.

Late in the day yesterday there were some positive indications out of D.C. about a stimulus deal, and perhaps the sell off yesterday nudged Secretary Mnuchin to be more open to Nancy Pelosi's requests in the bill? I don't know there either. Lots of speculation from me today. I still can't see it happening before the election. Too much at stake for both sides, but they are still talking. Internally it was a bit of a bloodbath with declining volume leading advancing by about 9 to 1 on the NYSE, and all of a sudden we saw 3 to 1 new lows over new highs.




There will be nearly 700 companies reporting earnings on Wednesday and Thursday alone. The kicker is that Facebook, Twitter, Google, Amazon, and Apple all report after the bell on Thursday the 29th. I don't think that's ever happened before where they all reported on the same day. Can you imagine the impact that crew could have on the market on Friday if all of them reported good, or bad reports?

It's no secret that these five company leaders are not fans of President Trump, so I am a little paranoid about this group's ability to impact the market two trading days before election day.

They could even report very good numbers for the last quarter, but all they'd have to say in their conference calls to send their stock prices reeling is that they are not confident in their earnings projections going forward with the uncertainty surrounding the recent spike in COVID cases. If these stocks fall, the market will tumble, and perhaps that could impact voters?

Is that going to happen? I have no idea. Like I said, it's a little paranoia on my part, but after yesterday's action, it is something to consider as a possibility before Thursday morning's IFT deadline - the last chance to make an IFT to get out of stocks if you are in, before those Thursday reports are released after the bell. That's not a recommendation - just an observation. I admit that many of my paranoid theories turn out to be nothing, so take it for what it's worth.

By the way, for you TSP Talk Plus subscribers, we talk about stuff like this all day in the Plus premium area of the forum, if you'd like to join in. https://www.tsptalk.com/mb/tsp-talk-plus/

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After a decent looking positive reversal day on Friday, the S&P 500 (C-fund) gapped open lower on Monday, easily fell through the 20-day EMA, and temporarily broke below the 50-day EMA before an afternoon rally took it off its lows. What was looking like a bull flag, has deteriorated some and it seems to be in a new descending trading channel. The 3425 was the neckline of the inverted head and shoulders pattern, and a key support level, but that was broken and now we'll have to watch to see if it acts as resistance again.



The PMO momentum indicator crossed below its moving average yesterday. That tends to be a bearish intermediate-term sign, but it can be a short-term bullish oversold sign.


The DWCPF (S-fund) was down sharply and broke below that old September high, but it was able to climb well off the lows to close just back above it. It might be wishful thinking, but the positive reversal yesterday has the bull flag still intact. I noted some big reversal days below. Many of them did what they are supposed to do, and follow through with the reversal (blue circles with blue arrows, or red circles with red arrows.) But some did not do that at all, which is unusual, and yesterday was one of those days after Friday's positive reversal.




The EFA (I-fund) broke down and just did not look that good. The dollar rallied, and that did not help.




The VIX finally broke out of its trading channel and closed above 30 for the first time since early September. With the election nearing and COVID cases rising, investors are betting on more wild swings.




Bond yields played a role in yesterday's sell off in stocks, as the 10-year Treasury fell below 0.80% temporarily after 3 days above it, so this looks like a failed breakout.




BND (F-fund) rebounded trying to get back some of that six day losing streak's losses. The 20-day EMA held as resistance and there was a possible negative reversal created.




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

Tom Crowley


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