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TSP Talk: A pullback fills some gaps. Now what?

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Stocks sold off on Monday, a day that was a holiday for the Federal government. Because of the holiday, the losses won't show in your TSP account yet because the share prices won't be updated, but yesterday's action will be combined with Tuesday's market action and be represented by Tuesday's share prices. The Dow lost 250-points on the day after being flat on Friday. The dollar rallied and the bond market was closed.

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I don't know how meaningful yesterday's action was given the "semi" holiday situation with the bond market and many banks closed. Most of the selling was just enough downside to fill last Wednesday's open gaps on the charts. Technical analysis would suggest that could potentially mean the downside is done as filled gaps can often act as support, but the action has been suspect recently with another series of lowers highs trying to form. We'll discuss this more down in the index charts section below.

The Bond ETFs were down despite the bond market being closed, basically because the bond futures were still trading. As yields rise, and the price of oil continues to rally, the stock market is showing signs of nerves as inflation is more and more evident.

This week will be a BIG week as far as inflation data goes, so it could be an interesting week for the stock and bond markets. Here's the economic data lineup according to

Oct 13
08:30 ET: CPI
For: Sep | Forecast: 0.3% | Cons: 0.3% | Prior: 0.3%

08:30 ET: Core CPI
For: Sep | Forecast: 0.3% | Cons: 0.3% | Prior: 0.1%

10:30 ET: EIA Crude Oil Inventories
For: 10/09 | Forecast: NA | Cons: NA | Prior: +2.35M

14:00 ET: FOMC Minutes

Oct 14
08:30 ET: PPI
For: Sep | Forecast: 0.6% | Cons: 0.6% | Prior: 0.7%

08:30 ET: Core PPI
For: Sep | Forecast: 0.5% | Cons: 0.5% | Prior: 0.6%

08:30 ET: Initial Claims
For: 10/09 | Forecast: 323K | Cons: 332K | Prior: 326K

08:30 ET: Continuing Claims
For: 10/02 | Forecast: NA | Cons: NA | Prior: 2.714M

Oct 15
08:30 ET: Retail Sales
For: Sep | Forecast: -0.5% | Cons: -0.3% | Prior: 0.7%

08:30 ET: Retail Sales ex-auto
For: Sep | Forecast: 0.6% | Cons: 0.4% | Prior: 1.8%

10:00 ET: Univ. of Michigan Consumer Sentiment - Prelim
For: Oct | Forecast: 73.0 | Cons: 73.5 | Prior: 72.8

The dollar rallied again on Tuesday so we saw gold and silver dip a bit, but oil and bitcoin continue to move higher, as did copper and lumber. Natural gas has recently come off its highs but still, inflationary prices are putting the squeeze on consumers. The recent rally in the dollar may actually be helping to keep prices from getting out of control. If the dollar was falling, these prices could really be soaring.

The price of oil hit $82 a barrel yesterday before pulling back some but it still gained another 1.47% on the day. Everyone is talking about oil and energy so it wouldn't surprise me if we get a little pullback in the short-term (maybe to $76 in oil), but over the next few months the chart does suggest the prices could continue higher.

The S&P 500 (C-fund) had an awful day on Monday, not so much because of the moderate losses, but the early rally failed and reversed hard to the downside creating a negative outside reversal day. But it was a semi-holiday, and the the downside did fill in an open gap, so it's tough to get outright bearish just based on yesterday's action, even though the chart does have some problems. If this current downtrend has any legs left, would could continue to see selling at the top of the descending channel and the 50-day EMA.

The DWCPF (S-fund) has a similar situation. That is, being in a downtrend and below the 50-day EMA, but it filled an important gap yesterday that turned out to be the low of the day. If there's more selling today, watch the green 100-day EMA line. It needs to hold.

The EFA (EAFE Index / I-fund) chart looks bad. It is possible that last week's low was a successful test of the July low, and in the short term we could see some of those overhead open gaps get filled in, but this one came down hard and fast, and it could take some time to repair the technical damage.

I had been concerned about the Japanese Nikkei Index over the summer, but it exploded to the upside in early September so I hadn't paid it heed lately. I checked it last night and it looks like potential trouble again. Reminder - the I-fund is about 25% invested in the Japanese market - it's largest holding.

The BND (bonds / F-fund) was down on Monday so Tuesday's prices will incorporate this modest loss in its price.

The Dow Transportation Index was down moderately, also posting a negative reversal yesterday, but it did manage to close above the 50-day averages for a fifth straight day. It could also be forming another bear flag with 14,600 being near the top, or it could move up to test the top of the red trading channel. Either way, there is resistance around each corner.

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

Tom Crowley

Posted daily at

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