TSP Talk Blog

Monday was a mixed bag for the stock market indices with the Dow and small caps doing well, while the S&P 500 and the Nasdaq struggled. Higher bond yields are getting some attention and that is what put the pressure on the big tech names yesterday. The Transportation Index had a good day but stalled at resistance. The dollar was up putting pressure on the I-fund, but the price of oil remains strong despite the rally in the dollar, and it closed at its highest level since 2018.

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I know it's boring, and I don't watch yields because of the F-fund, but rather because money managers are watching knowing a sharp spike in yields may not be the best thing for stocks. The yield on the 10-year Treasury jumped to over 1.5% yesterday and closed just below it. That's not a huge number but moving from 1.1% in August to 1.5% is meaningful, and if it happens to get up to 2.0% before the end of the year, the stock market will likely get antsy.




Yesterday the selling in the Nasdaq (-0.52%), and more so the large cap techs of the Nasdaq 100 (-0.81%), was most likely a direct result of the move up in yields. This chart has been holding true to the uptrend with a successful test of the 50-day EMA yesterday, but there is a possible bearish head and shoulders pattern forming. There's a better example in the small caps chart that I will post down below.




UUP was up again so it has been a good month for the dollar, which can put pressure on pricing. It's reaching up toward the August highs now.




The strength in the dollar however, has not held back the price of oil, which closed yesterday at its highest level of the year, and also the highest since 2018. Guess what that means? Gas prices are going back up, so that won't be good news for consumer spending.




Yesterday's dip in the S&P and Nasdaq were nothing too concerning yet given the recent rally off the lows, but we do need to keep an eye on the moving averages and support lines holding because there's always a chance of a double dip to the lows. The debt ceiling deadline is quickly approaching and that is hanging over the market this week.

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The S&P 500 (C-fund) stalled after the strong 3-day rally last week. Nothing too serious here yet, although the recent lower low brings up the question of whether the rising trend may be breaking. Will we see a lower high before it gets back to new highs as we've seen all year? The lower low and the break of the 50-day EMA is a change from what we have been seeing.




The DWCPF (S-fund) had a good day as it appears those selling big tech in the Nasdaq were buying up the small caps where there are a lot of energy and financial stocks, which have been doing very well lately. There's a possible head and shoulder pattern here, as I mentioned while talking about the Nasdaq above, so we'll see if this can break above that 2280 area or if this become the right shoulder of an H&S pattern.




The EFA (EAFE Index / I-fund) was down slightly as the strength in the dollar added some pressure. It closed below the 50-day EMA for a second straight day, and 5th day out of the last 6, so there's some reason to be concerned if it can't reverse back up quickly.




The BND (bonds / F-fund) was down again on the rising yields. The bear flag breakdown continues with potential eye on that 200-day EMA at 85.60.




The Dow Transportation Index had a big day but came off the highs after hitting the 50 and 100 day averages. Here, and at the 14,800 area, I'd expect the bears to put pressure on.




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

Tom Crowley



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