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TSP Talk: Is the relief rally running out of steam?

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Yesterday was a day of digesting the recent rally, but the bulls did hold onto modest gains into the close. Some indices hit resistance and slowed a bit, but that's not unusual on the first push higher. The problem is, they can't stop here or the bears will likely show up again. The Dow closed with a gain of 38-points but maybe the biggest move yesterday came from the dollar, which broke down.

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We did get a very inflationary number out of the CPI report yesterday with year over year consumer prices up 7%, but the report came inline with estimates so the market had basically priced in the news. Today we get the PPI report so we'll see how the market likes that one.

Here's a look at the dollar that fell sharply and finally broke down, as you might expect during an inflationary environment, but the recent strength was a result of the Fed's plan to slow inflation.

As we mentioned yesterday, the weak dollar will generally help prices and once again we saw gold, silver, copper, lumber, oil and bitcoin all up sharply on the day.

The yield on the 10-Year Treasury pulled back enough to fill one small open gap and it looks like it wants to test the double top peak from the fall as possible support, although there are are a few more open gaps below that line that may want to get filled.

The internal numbers were mixed with the NYSE showing positive ratios, although basically flat on the advance / decline issues. The Nasdaq was more negative with more stocks down than up, and volume also negative, despite the modest gain in the index.

The next few days will be key as we see some charts balking at overhead resistance. The question will be if these are temporary pauses or outright roadblocks.

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The S&P 500 / C-fund was one of the winners yesterday as it did manage to get above that 4715 area. That had been tough resistance in November and December before finally breaking through before Christmas, but the early January sell off took it right back below that key level. Yesterday's close above it is encouraging, but the spinning top formation shows indecision from investors. Unfortunately not all of the charts had the same outcome.

The DWCPF (small caps / S-fund) was one of those as it fell 0.55% after rallying nicely in the morning. It did manage to close above that brown 280-day average, which seems to have some significance on this chart. Today will be very interesting as we'll see if buyers are willing to come in at that level again, or if the bears are ready to test Monday's low already.

The EFA (I-fund) just loves a weaker dollar and yesterday was a good example. The 1% gain led all of the indices as it inches toward the prior high. There is some resistance near 80 so it will be a good test of how strong the I-fund is. You can see in the chart, versus the UUP chart, how the weak dollar helped the I-fund outperform the C and S funds over the last several weeks since the UUP peaked in late November.

BND (Bonds / F-fund) was basically flat after an early rally failure at the old support line, which is now holding as resistance.

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

Tom Crowley

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S&P500 (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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