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TSP Talk: The bears take back Friday's gains

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Stocks began the new week with a swan dive and quickly gave up Friday's big gains. Despite the futures being relatively flat leading up to the open on Monday, there was a lot of selling once the opening bell rang. The selling was swift and there was dearth of buyers which kept the indices pinned close to those lows for most of the day. Tech stocks took the brunt of the selling as inflationary concerns permeated trading. The Dow lost 324-points, yields were up, the dollar was down, and that helped commodity prices rally again.


Daily TSP Funds Return
Internally the Nasdaq took the brunt of yesterday's weakness with nearly 3 to 1 declining issues over advancing. There were also 252 new lows made on the Nasdaq. The NYSE was about 2 to 1 in favor of decliners, but the volume ratio wasn't as bad with about 11 to 9 in favor of declining volume.




The dollar was down which may have actually cushioned some of the losses in stocks, because we did see decent rallies in oil, natural gas, gold, silver, copper, and most commodities. Unfortunately, that's inflationary and consumers don't really want to see that.




The GDP estimate from the Atlanta Fed's GDPNow continues to fall and now it is down to 2.3%. Remember, it was over 6% in August.




The 10-year Treasury was up slightly to 1.48%, so this wasn't much of a catalyst, although there may be some trading programs out there programmed to sell stocks when the yield is up, and buy when it is down.




With GDP falling and yields rising, it's kind of a perfect storm for earnings problems, and with earnings season kicking off in a week or two, we may start getting some early guidance warnings, as some companies like to do to keep from shocking investors too much on earnings day.

The September Jobs Report will come out on Friday morning before the opening bell. Estimates are looking for a gain of about 450,000 jobs and an unemployment rate of 5.1%.





The S&P 500 (C-fund) failed to hold onto Friday's gains and it fell back below the 100-day EMA. This looks like a serious pullback, but that wedge formation has a bull flag look to it so I don't think we call a victory for the bears just yet, although the bulls were nowhere to be found on Monday. The longer we go without congress announcing a resolution to the debt ceiling - the deadline is now October 18 - the more nervous investors will get. The 200-day EMA hasn't been tested in a long time, and that is always a possibility.




The DWCPF (S-fund) had a bad day and lagged both the S&P 500 and the Russell 2000 small cap index, which is a little unusual since it usually falls in between the two returns-wise on any given day. It closed below both the support line and the moving average that I've highlighted with the green arrow.




Here's the Russell 2000 small caps index which held above Friday's lows and lost less than 1% after gaining 1.6% on Friday.




The EFA (EAFE Index / I-fund) lost 1% and that may have been helped by the weakness in the dollar yesterday. The downside gaps are all filled as it approaches its 200-day EMA, and all of the open gaps are now overhead.




The BND (bonds / F-fund) was down slightly with yields up a bit. Its trying to hold above the 200-day EMA, but now that it filled that gap, it may not have the pull to remain above it.




The Dow Transportation Index actually held up well, but performed poorly, if that makes any sense. It was down only 0.29% but it created a nasty negative reversal pattern after closing well off its highs.




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

Tom Crowley


Posted daily at www.tsptalk.com/comments.php

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SPY (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
BND (F Fund) (delayed)

(Stockcharts.com Real-time)

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