TSP Talk Blog

Stocks opened lower on Tuesday, but battled back most of the day to close off those morning lows. The Dow lost 167-points, small caps led with an impressive gain, and bonds also rallied. The early weakness did serve a purpose in that the open gap created on the S&P 500 chart on Monday was filled before we saw the in indices stabilize and move higher into the afternoon. We did see some fading late so the spinning top candlesticks does show some uncertainty out there.

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The market seems to be trying to weigh improving economic conditions vs. increasing COVID cases, and with the indices near all time highs, the economic picture seems to be winning out for now.

The weakness in the indices masked some strong internal numbers yesterday with both the NYSE and Nasdaq showing impressive advance / decline ratio data, as well as new highs vs. new lows.




We've seen a huge upside move in the indices in November, but will we see a rerun of September and October, where the early monthly moves reversed in the latter part of the month? If you recall, September started out very poorly, but rebounded late in the month, and that rally continued into the middle of October, before those gains were wiped out. Now, here we are on the 18th of November and stocks have gone virtually straight up all month. Can it sustain those gains into the normally strong Thanksgiving period, or is another reversal coming?

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The S&P 500 (C-fund) closed just about in the middle of yesterday's intraday range which created one of those spinning top candlestick formations, and that "can" be a sign of indecision and a direction change. We have seen a few negative reversals recently, which almost always lead to short-term weakness, turn into more upside so I'm not very comfortable in this market environment to rely on these common setups to do what they typically do. The angle of incline is extreme and that could lead to a pause, although if the mid-month reversal trends of September and October continue, it could also mean a swift reversal to the downside, as we talked about above.




The DWCPF (S-fund) made another new high as the stronger economic numbers is positively impacting these economically sensitive small caps much more recently.




The EFA (I-fund) was down slightly but the dollar was as well, and the dollar has been down all month and because of that we are seeing the I-fund benefit tremendously in November with its 14% gain. However, this chart doesn't look very natural and something may come along to fill in some of those gaps below.




The Transportation Index made a new high but it continues to get stretched to the upside in November, and it is inching above the rising resistance line. That is a large rising wedge pattern, which can be troublesome.




BND (F-fund) was up sharply yesterday, and the yield on the 10-year Treasury, which nearly moved back above 1.0% earlier this month, is now back down to 0.88%. Yields down, bond prices up. These two charts with different time frames show bonds have rallied recently, but the trends are still down.




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

Tom Crowley



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