TSP Talk Blog

Stocks got a tremendous positive reversal yesterday although the S&P 500 remains pinned in a trading range between 4275 and 4375, and we seem to trade almost in that entire range every day. Yesterday's low in the S&P was 4290 and the high was 4366. Small caps of the S-fund lagged but came back from a big loss to close slightly positive, although the Russell 2000 lost 0.53% on the day. Oil and natural gas pulled back sharply after their recent big rallies. Gold and silver were up despite a rally in the dollar.

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The action was positive in the S&P 500 - to a point. To the point where it hit the top of its trading range. You can see that it has been a back and forth affair for several days with both resistance and support holding firmly, which give us these wild swings in a 100-point range.




The 10-year Treasury rallied was down after an initial move higher with the release of the ADP employment number yesterday, which was higher than expected (568,000 vs. 404,000 expected.) That is a bull flag and technical analysis would suggest the next big move is to the upside, although there's no guarantees of course, and we can see an example of that in July when a bull flag broke down.




The dollar was up sharply as it tests last weeks highs, and that put pressure on prices including the red hot oil and natural gas markets. But there are now 5 open gaps below on the UUP chart that are just there for the taking if the dollar bears can pull it back down.




Oil did drop fall $1.50 Wednesday, but as I mentioned yesterday, oil has doubled over the last year and that translates into gas prices at the pump being at a 7 year high. Below that is the chart of natural gas which plummeted 10% yesterday, but it too has more than doubled over the last year.




Oh, and the price of coal is up 180% this year - something you don't generally hear about. Inflation is real and potentially troublesome, especially if the economy continues to slow from the strength we saw earlier in the year..

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%.

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The S&P 500 (C-fund) has been churning in that short term range as we pointed out up above. In the process of churning, we do have a possible bear flag forming, however there is decent support under the flag so it's going to be a battle. If the bear flag and trading range can break to the upside, then the 50-day EMA and a descending resistance line are not much further overhead, so it's going to be a challenge for the bulls.




The DWCPF (S-fund) lagged all day but recovered fully from a nasty loss of nearly 2% in the morning. It closed back above that key moving average (green) but you can see where it hit resistance - right at the old rising support line, which it fell through a few days ago. This kind of resistance often either acts like a brick wall, or we get a big gap over it at the open.




This is a long term monthly chart of the Nasdaq. Oscar Carboni mentioned this and I thought it was interesting. Since the COVID lows in early 2020, this moving average has held on every pullback. Each candlestick represents one month of action on the Nasdaq. So far that average has survived the early October jitters.




The EFA (EAFE Index / I-fund) rang a bell at the lows yesterday by testing and reversing at the 200-day EMA. That may not be the low, but it could generate a good bounce. There are open gaps above that could be filled, but this chart really gave us a lot of warnings if we were paying attention. It had a failed breakout in September, fell through rising support soon after, and failed again when it tried to get back above that support. That's classic bearish action. Now that it found support at the 200-day EMA we may want to start to look for clues that the low is possibly in.




The BND (bonds / F-fund) was up slightly and remains in that bear flag.




The Dow Transportation Index had a good day but once again it ran into resistance at the moving averages. If it can get over 14,530, then a test of the top of that channel would be a good possibility.




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

Tom Crowley



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