TSP Talk Blog

Stocks were down on Wednesday but it was another yawner as there wasn't much action. The Dow lost 153-points and the small caps finally had a bad day, but perhaps the key moves yesterday were in bond yields continuing to slide, the dollar rallying, and the Transports selling off more than 1%. The latter was mainly because of UPS falling but the Transports are often considered the heartbeat of the economy. OK, I made that up, but they are a good indicators for economic conditions.

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The yield on the 10-year Treasury, also an indication of economic strength, fell again and that's four straight closes below it moving average. It could be testing the May 7th low and pop back up, but any further downside may get trigger more concern.




The dollar started the day sharply low but it reversed and closed with a gain. Stocks and commodities have benefited from the weaker dollar so we probably need to be on the lookout for a relief rally which could trigger a pullback in the stock market.




All eyes are on this morning's May CPI (Consumer Price Index) report as it is a good measure of inflationary conditions. Estimates are looking for a gain of 0.4% after a gain in April 0.8%. This has been a key focus on Wall Street so any surprises could move the stock and bond markets.

Admin note: We're having some issues with the timing of the email alerts from the Last Look Report, which is on a free trial this week. There seems to be a delay from the time we send it, until the time some receive it, and it may be because of the number of people who have signed up for the free trial. We are working on alternatives before we release this as a full service, so the free trial may continue while we get things worked out. The info will come in a daily email from TommyIV about 30 minutes before the IFT deadline to help us make any last minute allocation decisions. It will also be posted in the premium area once the free trial is over. I'm sure it will evolve after we get started. Once the free trial is over, the cost will be $10 a month, or $5 for those already subscribed to another service. You can view a sample of what subscribers may get each morning, and there's a place to add you email to the list to receive the free report this week. The Last Look Report Info

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The S&P 500 (C-fund) still hasn't pulled back much from the double top, but perhaps it is now forming a flat top, which also tend to be bearish, or it could break through to a new high. Perhaps the CPI report this morning will break that gridlock. There is some support coming from below so it has been consolidating nicely without losing much steam. There are still a couple of open gaps below, so that's a possible clue that it needs to do some backing and filling before it makes a new high. Of course a false breakout could get everyone leaning the wrong way.




The S&P 500 lost just 0.18% yesterday, but the Equal Weighted S&P 500 Index (same 500 stocks, all weighted the same) showed more wear and tear from the broader market.




The DWCPF (S-fund) inched higher at the open yesterday but flipped around to the downside fairly quickly and saw an overdue dip. Is this the start of a pullback for the small caps? Possibly. There is strong resistance overhead and it did fall back below that March peak yesterday.




The EFA / I-fund was down on the day and it too could use a little consolidating before continuing to make new highs ever day. It seems like a reasonable expectation, but the bears have refused to jump in and make a move so far.




The Dow Transportation Index was down 1.24% yesterday after UPS lost over 4% on the day. There is some support at yesterday's lows but the 50-day EMA is right there to be tested. If 15,200 doesn't hold we could be seeing the start of an actual correction (10% loss or more) and the prior corrections have found support near the 90 day moving average which is currently near 14,625 (not shown.)




BND (bonds / F-fund) rallied again as those yields continue to slide for some reason. There is that open gap near 86.20 that could be an upside target. Why it would go any higher than that wouldn't make much sense, unless the economy has more problems than we are currently seeing.




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

Tom Crowley



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