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TSP Talk: Another Monday decline

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For the second Monday in a row, stocks lost ground. The losses varied quite a bit with the Dow down a modest 0.29%, small caps were flat, but the Nasdaq lost over 1.2%. Last week, after the Monday sell-off, stocks bounce back during the rest of the week, so this week starts with a similar challenge. The dollar was up again, and that is putting some pressure on stocks and prices in general. Did you see bitcoin yesterday? It went from a high near $43,000 over the weekend, to a low near $31,000, IN ONE DAY!

Daily TSP Funds Return

Where bitcoin goes from here, I don't know, but it's a reminder of how quickly bubbles can burst. Of course in bitcoin's case, the loss from $43K to $31K was just erasing the prior 3+ days of gains, so handle that one with kid gloves. The moves are dramatic.

As for stocks, I don't know if a Monday decline is going to mean much, but like bitcoin, some of the stock indices certainly need a break. Yes, there was an overreaction during last March's crash, but our S-fund index (DWCPF) has gone from 900 to over 2000 since those lows, and if you know something about retracements of gains, you know that this is capable of a major haircut, say 10% - 15%, without even breaking its longer-term uptrend.

The negative jobs report was an eye opener on Friday and the market dismissed it, betting on more stimulus. Perhaps today a little more reality set in. The question is, can stimulus protect the stock market from its normal gyrations? Can it overrule overvalued prices during an economic slowdown with lockdowns continuing to some degree across the country? Perhaps it can. The Fed is certainly doing its part with interest rates near 0% and open spigots on the Money Supply, but it seems like whenever we say, "it's different this time," it usually isn't.

The S&P 500 (C-fund) pulled back moderately on Monday, basically giving back Friday's gains and slightly more. It remained above that breakout resistance line, which it will now test as support. F flags tend to breakdown, as I have said repeatedly, but so far it has closed three days in a row above resistance. Finding support here would be very impressive, while a drop back into the channel would basically put it back to where we've been - waiting for a breakout of breakdown. So much at stake in the coming days.

The DWCPF (small caps / S-fund) held up well, coming back from some sharper morning losses to end the day flat. It remains below that old support line that broke down at the end of last year, but it is still basically near its all time closing high.

The EFA (I-fund) was down sharply but remains in its trading channel.

The dollar was one of the main reasons why the I-fund was hit, and it looks like we have confirmation of the dollar breaking that down trend. It is still below the 50-day EMA so this could just be a bear market "dead cat bounce" for the dollar.

The Volatility Index was up nearly 12% on the day so that support off the recent lows continues to hold. It's only had one close above the 200-day EMA since early November, and that could be the next test if stocks don't rebound soon.

BND (bonds / F-fund) was down early but came off the lows by the close, and in the process of falling it filled that open gap (blue) from back in November. The only open gap in the vicinity now is up near 87.80.

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

Tom Crowley

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SPY (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

( Real-time)
EFA (I Fund) (delayed)

( Real-time)
BND (F Fund) (delayed)

( Real-time)

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