TSP Talk Blog

Stocks started Friday with some gains after a weaker than expected jobs report, although the unemployment rate fell further than expected and wages were up more than expected, and that started the inflation concerns again. By the close the bears took over and the indices posted some moderate losses. Large tech continues to struggle with interest rate hikes looming, and the I-fund has been holding up best over the last several weeks. Bond were sold again as yields continue to move higher.

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The December Jobs report came it at +199,000, less than half of the 440,000 jobs that were expected. That's has become a pattern recently so there is some concern about the economy, but the unemployment rate came in under 4% and wage growth was better than expected. That part sounds good until you consider that the Fed is worried about inflation and that data does not help, so we may start hearing about stagflation if things don't change.

The yield on the 10-Year Treasury is finally showing life as it has been moving basically sideways for the last 10 months after that big rally last February. It closed at a new high at 1.77% on Friday, and that is what is putting pressure on the tech stocks, and growth stocks in general. This cup and handle formation breakout is considered as a bullish formation - for yields, but bad for bonds and the F-fund should it the breakout hold.




The dollar is tagging the 50-day EMA again. Prior tests have held and it also looking for support at the bottom of that channel so this week the channel will either remain intact and we'll see it move higher - or the channel will break and we'll have a new down trend for the dollar. The dollar tends to get weaker in inflationary environments but the actions and projections from the Fed to slow down inflation has kept the dollar afloat thus far.





The Nasdaq 100, which is the large tech stock index, like the dollar, is flirting with the bottom of a trading channel. The outcome here is most likely going to impact the direction of the S&P 500 (C-fund). We saw a double top pullback off of 16,600, but whether that is complete isn't clear, although the bottom of that channel, which could be considered a bull flag, needs to hold.




Momentum is down right now in the stock market, so the bears have some control, but the bull market is still intact so the bulls may not be done just yet.

Earnings season will kick off this week with most of those big money mover tech companies coming later in the month. Historically it has set up a "buy the rumor, sell the news" effect in January (positive) and into February (negative.)
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The S&P 500 / C-fund dropped for a 4th straight day on Friday after making a new intraday all time high last Tuesday. It is now in the area of its 50-day EMA, which hasn't exactly been holding in recent months, although buying any push below it has been working of late. A push below the average would have it testing the bottom of its rising trading channel near 4675. There's nothing too wrong technical here but again it seems to be at the mercy of those large tech stocks which have remained buoyant for months, helping the S&P make repeated new all time highs over the last year.




The DWCPF (small caps / S-fund) is in a very sensitive spot here. It came into last week with a good looking bull flag formed, but it was under underneath a ton of moving averages which have held as resistance and the flag failed badly. Last week's sell off pushed it low enough to have it fill in that open gap near 2100, and the bottom of that blue channel needs to hold or the bears may try to really push this down.


The EFA (I-fund) has been holding on for some reason, showing relative strength versus the U.S. stocks funds going back through December. The 50-day is being tested now, but it has been hit and miss in recent months on whether that holds as support or resistance. The same gap from December 21st that was filled last week on the S-fund chart above, is still open on this chart. Does this have to get filled before moving forward? It may depend on the 50-day EMA holding or not.




BND (Bonds / F-fund) continues to deteriorate after breaking down last week. That big open gap near 84.70 is there to be filled, but it would have to get back into that channel first.

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

Tom Crowley

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