TSP Talk Blog

The rotational play continues as the back and forth in the indices continued yesterday compared to Monday's action as the Dow, which was barely negative on Monday, was the laggard on Tuesday with a 474-point loss. Meanwhile the heavily beaten down Nasdaq and smalls caps actually held up well yesterday. Bonds finally broke down and the dollar was down but relatively flat.

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Internally the up / down issues was bad news but the Nasdaq actually saw positive share volume breadth as more shares traded up than down. However notice the new highs vs. new lows on the Nasdaq. That's pretty poor. The NYSE was about 3-2 in favor of decliners and that shows why the S&P was more negative than the Nasdaq.




The yield on the 10-year Treasury moved higher - something I have been expecting it to do for weeks but it hasn't done much of until last Friday's positive reversal after that false breakdown after the disappointing jobs report.




Today the CPI (Consumer Price Index) report is due and it should be the focus for many fund managers as it will give us a better idea where inflation stands, and that seems to be the bottom line at this point as investors try to figure out if or when the Fed is eventually going to rate interest rates.

I still have family in town, and that family is TommyIV from the forum. For those who may not know, he's my son and he lives in a different state than me. He is most likely taking over TSP Talk at some point, so I use this time to show him as much as I can, although I may never fully retire since I enjoy what I do. My goal at some point is to be able to take a week off here and there without doing much of anything work-wise. That is something that hasn't happened since I started the site in 2004.

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The S&P 500 (C-fund) gapped lower at the open on Tuesday, falling below some short-term support and the 20-day EMA and that's another warning sign, but not a deal breaker yet for the bull market. There was a bit of a positive reversal and that could mean a rally back to fill that gap today, but from there -- that's the question. The CPI report we talked about above could set the tone.




The DWCPF (S-fund) actually turned positive with just a few minutes left in the trading day, but it closed just slightly negative. It broke down from the some longer term support to start the day, but the positive reversal allowed it to close back above that support line (blue.) It has now closed below the 50-day EMA for two straight days and during the prior pullbacks it came back fairly quickly from similar breakdowns, so if it doesn't this time, we'll know it's different different this time.




The EFA (I-fund) was it hard after holding up well on Monday with the TSP giving it a flat price on the day, which seemed generous, and yesterday's -1.45% price wasn't bad considering that. A large open overhead gap was created with the loss so it has some wiggle room in either direction in the short-term, but the longer term trend is still positive.




The Transportation Index briefly broke down from its very bullish trading channel, but rallied back to close within it again. No harm, no foul but possibly an eye opening warning.




The Volatility Index spiked to another multi month high yesterday and above the 200-day EMA, but closed off the highs. It closed above 20 for the first time in a while so perhaps something is changing here. It's not that common to get a one day spike so I suspect we could see more wide swings in stocks in the coming days.




BND (F-fund) finally broke down from that long two month trading channel - something I had been anticipating for weeks but it never happened. The question is, does that mean new lows are coming down the pike for the F-fund? I don't see why not because I could see yields on the 10-year moving back over 2% in the near future. Again, today's CPI report could set the tone for that.




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

Tom Crowley



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