TSP Talk Blog

Stocks sold off late yesterday and the indices may have dodged a bullet with the strength in big tech yesterday. The Dow lost 266-points and the S&P 500 was down a half of a percent, and all of that loss came in the final 90 minutes of trading. Small caps lagged badly. Bond yields slid again giving the F-fund another boost. The price of Oil fell sharply on higher than expected inventory numbers.

Daily TSP Funds Return More returns

Microsoft and Google didn't do much after hours on Tuesday after releasing their earnings, but they sure did well during yesterday' trading session. Those behemoths, along with gains in Amazon and Tesla, were able to keep the Nasdaq in the green despite a largely negative breadth (many more stocks down than up) in the index. It also kept the Dow and S&P 500 from the larger losses that we saw in the broader Russell 2000 index, which doesn't have those big tech stocks to protect it. The Russell was down nearly 2% on the day.

Falling yields may have helped tech, and we can see there is a break down happening. I've been saying that these F-flags tend to break down. I didn't know why that would happen and was skeptical that it would, but that's what happened yesterday.



The dollar was flat and has been trying to hold up, but that looks like a bear flag on the chart, so I'd lean toward seeing a lower dollar by next week.



The 2 year / 10 year yield curve has been falling. I don't want to make a big deal out of this because I really don't know what I'm talking about. I just noticed that when this falls below 1.125 toward 1.000, the S&P 500 starts to pullback. Nothing serious, but a pattern to watch now that it is pulling back again. The blue boxes represent times when the S&P was rising while the curve was falling, but both times the curve was above 1.125. If it continues lower from here, perhaps we'll see another meaningful market pullback.




GPDNow has lowered their GDP estimate for the 3rd quarter yet again.


"On October 27, the GDPNow model estimate for real GDP growth in the third quarter of 2021 is 0.2 percent, down from 0.5 percent on October 19.


"This is the last GDPNow forecast for the third quarter. The first GDPNow forecast for the fourth quarter of 2021 will be on Friday, October 29."



Source: https://www.atlantafed.org/cqer/research/gdpnow


There is an FOMC meeting Tuesday and Wednesday of next week, and the tapering discussion could be a market mover, so investors could get tentative late this week and into next.

---

The S&P 500 (C-fund) pulled back, like a good chart should after a negative reversal day like we had on Turnaround Tuesday. There's some immediate support near 4550, but from there we have four open gaps that are potential targets if the pullback gets more serious.




The DWCPF (S-fund) took a big hit yesterday and closed right on top of that open gap that we have been watching obsessively. The 50-day EMA is in that gap and that seems like a reasonable minimum pullback level, with the bottom of that open gap being another convenient level if buyers are waiting to step up. Of course this chart has been doing top to the bottom, bottom to the top, moves all year so a decline down to the orange moving average and / or the lower end of the channel is also a possibility.




The EFA (I-fund) was down and it also fell below a rising wedge pattern, which is typical, and so far we are seeing a lot of typical technical analysis play out. If that continues I'd expect a move to fill one or both of those open gaps in the coming days or weeks.




BND (Bonds / F-fund) rallied again making it four straight days. It blasted through the 200-day average, but the 50-day average may have pushed it back some. The "W" bottom looks solid, except that it could also turn out to be a bear flag, so I'm not 100% in either camp right now.




The price of oil fell 2.4% yesterday after hitting new highs this week. The negative reversal day on Tuesday seems to have set up the decline, which again is technical analysis 101.




The Dow Transportation Index pulled back sharply from a double top formation so we'll give this a few days to try to work that out. It's not a big bearish signal, but modest pullbacks do tend to start at double tops.




Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php

For more info our other premium services, please go here... www.tsptalk.com/premiums.html

To get weekly or daily notifications when we post new commentary, sign up HERE.

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

Tom Crowley


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

The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.