TSP Talk Blog

It was basically a stalemate on Wall Street yesterday as the bulls and bears battled it out only to close mixed, with some gains, but also near the lows of the day. The Dow gained 91-points while the S&P 500 added 7, but it had been over 30 earlier in the day. Smalls caps also gave back some early gains selling off in the final hour and near the recent closing lows. Yields and the dollar continue to put pressure on the market, and prices in general.

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Let's make this quick today because, while there is a lot going on in D.C. causing concerns, the real catalyst right now is the strength in the dollar and yield on the 10-year Treasury. Period. The Fed's plan to taper their bond buying program is finally having an impact on both of these, and look what has happened to them since the start of September.

This quick move up in yields tends to scare the stock market, but the bulls may see some relief if the blue rising resistance line on the 10-year can hold at the top of the channel and trigger some kind of pullback.




The dollar, on the other hand, blasted through some resistance yesterday (red) but the top of the blue parallel trading channel is still quite a bit overhead, so that could be a roadblock for prices in general, and that includes stocks.




We saw gold, silver, oil, natural gas, copper, lumber, you name it, all down on the day yesterday, and that's what a 0.72% gain in the dollar will do.

Add that to today's government spending and shutdown deadline tonight, and investors seem to be getting a little nervous. The wall of worry is getting more steep.

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The S&P 500 (C-fund) was up but closed near the lows of the day barely holding onto the support line of the head and shoulders pattern (blue.) The red circle represents key support area that must hold. It is a combination of the H&S neckline, an old resistance line from back in May and June, the prior low, and the 100-day EMA.




The DWCPF (S-fund) also gave up some early solid gains to close with a loss and at the lows of the day, and it is now testing its key support that has held repeatedly this year. The 130-day EMA (or 26-week / half year) moving average is in green and for whatever reason, the small caps have bounced off this line for months. A test of the intermediate term trend is here again.




The EFA (EAFE Index / I-fund) was down as the 0.72% gain in the dollar was just too much for this fund to handle despite gains in the European markets yesterday. The dollar chart is below the EFA.




The BND (bonds / F-fund) was flat but it failed to get back above the 200-day EMA which could hold as resistance now. There is an open gap at 85.80 that I suspect will get filled in the short term, but this is not a good looking chart right now.




The Dow Transportation Index continues to act like it is in a bear market as resistance continues to hold and rallies are being sold.




The High Yield Corporate Bond fund was actually up yesterday, and that took it back above the 50-day EMA, which is a good sign, but it may be too early to call the downside over.




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

Tom Crowley



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