TSP Talk Blog

Day two of the pullback took stocks off their highs and we're close to knowing if this is a 2 - 3 day dip, or the start of a more serious decline, similar to what we saw in January, February, and March, with those pullbacks lasting between 4 and 13 days before reversing up again. The Dow lost 256-points on the day, which was off the lows after a final hour push higher yesterday. Bonds bounced back yesterday, yields were down, and the dollar also rebounded some, putting a lot of pressure on the I-fund.

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Small caps also performed poorly so it was a pretty broad sell off, and internally the numbers confirm that. What was a little surprising was the 138 new lows on the Nasdaq despite the index nearly reaching new highs late last week.



The pop in new lows triggered a Titanic Syndrome warning, but they seem to be more effective in predicting further weakness when they come in bunches rather than a single signal. We'll just have to wait to see what the rest of the week brings before considering that something to worry about.

The dollar was up slightly and may be eying the open gap created on Monday just overhead, but there is a sharply descending resistance line in the way. There's also another open gap down near 24.35.




Yields were down but remain above that key 50-day average.




Earnings are coming out more rapidly and we got Netflix yesterday after the bell, one of the FAANG stocks, and they disappointed trading down 9% after hours. Next week we get many more of the bigger name FAANG stocks, so buckle up. People are expecting good things so... they better be good.

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The S&P 500 (C-fund) has been dipping back into the trading channel after pressing against the upper ends of the resistance lines for a few days. There's no rule that it has to pull back to the bottom of the channels, but filling the open gap near 4025 would satisfy the gap and the red rising channel, so perhaps that's a target. The PMO indicators is starting to rollover some, and I marked prior recent peaks in that indicator.




The DWCPF (S-fund) was down sharply, but it did bounce back some after filling in that open gap below 2140. The 50-day EMA also held, although the prior pullbacks eventually broke below it so I'm not sure we should expect it to hold.




The EFA (I-fund) was down sharply with the dollar up and not helping. It fell out of its narrow red rising trading channel, and so far it has found some support at the top of the old blue rising wedge pattern.




The Dow Transportation Index is holding up well but continues to struggle at the 15,000 area. A disappointing earnings report after the bell from CRX, a freight railroad company, could put some pressure on the Transports today.




The VIX popped above recent resistance again yesterday, but unlike Monday, yesterday it closed above it.




BND (F-fund) rallied back from Monday's big sell off, and close back above the 50-day EMA, although it still remains in I am still calling a bear flag.




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Tom Crowley


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