TSP Talk Blog

Stocks were mixed yet again, and of course the Fed shook things up after their policy statement announcement. The Dow was down 128-points, the S&P 500 was flat, the Nasdaq rallied, as did the small caps. No change in interest rates, but the key was their expectation for economic growth and whether they addressed their bond buying program.

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The answers were that they were happy with growth which seemed to be inline with many models, and basically said that they are talking about, talking about tapering the bond buying program, but they aren't actually talking about it yet. Get it? They don't want to talk about it. At least publicly.

Bond yields moved higher right after the policy statement but settled back closer to where it was before the Fed's announcement. So the first reaction was likely relief that they didn't have anything negative to say about the economy, but they were reluctant to give much more info, so it became a non-factor on the day.




The dollar fell sharply and looked to that 200-day EMA for support. Can it hold again, or is this 7-week rally running out of steam? My guess it holds, but that may create a right shoulder of a head and shoulders pattern.




Internally the numbers were strong thanks to that rally in the broader indices like the Russell 2000 small cap index. The advancing volume was slightly more than 3 to 1 over declining volume on both the NYSE and Nasdaq, but once again a big day in the Nasdaq could not stop the recent pattern of seeing more 52-lows in the index than new highs on the day. 68 new highs vs. 76 new lows.

Facebook reported strong earnings after the bell yesterday, but it was down about 4% in after hours trading as investors didn't like their forward guidance. That could put some pressure on the Nasdaq today.

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The S&P 500 (C-fund) was flat yesterday and the recent action looks fairly similar to the the prior push to new highs, but of course it was just a day or two later that it peaked and pulled back again. It's hard to fight the trend but it is at the top of the trading channel again so there are some short-term concerns, especially as we head into August - historically one of the tougher months of the year for stocks.




The DWCPF (S-fund) rallied early and then the Fed helped push it up toward the recent resistance line so today's action could be key. A follow through rally would be a sign of strength with buyers willing to step in near the top of its range. A pullback would obviously say the opposite - another round of selling at resistance.




The EFA / I-fund had a good with the dollar falling sharply yesterday. It's poking its head back above that descending channel - something it could not hold when it tried on Monday. It has closed for 5 straight days above the 50-day EMA and that's good sign after the recent breakdown.




The Dow Transportation Index got hit hard again. Not as bad as Tuesday's loss, but on top of Tuesday's loss. It seemed to find support at the bottom of the descending channel, but it closed below that 100-day EMA for a second straight day.




The BND (bonds / F-fund) rallied modesty despite the 10-year yield moving higher yesterday. It was an FOMC day so it's tough to say whether it was a reactionary move, or another sign that bonds may have more room to run on the upside. The small bear flag is still intact, but strong support continues to hold at the top of the large rising trading channel.




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Tom Crowley




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