TSP Talk Blog

The bears were ready at Monday's open to show their teeth and follow through on last week's sell off. The selling continued into early afternoon but, just as many indices started to flirt with support, we got the headline that Elon Musk's offer to buy Twitter was accepted. This put a different spin on the day and we saw a decent intraday reversal. The Dow turned a near 500-point loss into a 238-point gain by the close. Oil was down and bonds were up, as yields dipped of their recent highs.

Daily TSP Funds Return More returns

The market didn't wait until Turnaround Tuesday and the deal to buy Twitter may have triggered an early catalyst. Not that there's any guarantees that this will hold. We had two and half days of selling and things had gotten oversold in the short term, and a bullish headline may have been a reason for the selling to slowdown.

I suspect that investors interpreted the confidence from someone like Elon Musk to lay out a lot of money for a company in this economic environment as a bullish sign, and that may have eased some fears, and fear had been getting quite extreme in recent weeks.

So, other than the Twitter deal, there's no real surprises in the action yet. As we talked about yesterday, we suspected a bearish start to the week after last week's selling, but expected some relief as the indicators got oversold and investors became overly bearish. I'm a little surprised it happened on Monday, but as I said, the Musk / Twitter deal may have hastened the action.

That doesn't tell us what comes next. We are sort of in a bear market environment still and traders tend to sell rallies in bear markets, but sometimes those bear market rallies can run much longer than we expect, as we saw in March. Maybe that one was too recent to see something like that happen again, and I'd be concerned if this rally makes it up to obvious resistance areas. Sometimes relief rallies only last 2 or 3 days in bearish down trending markets.

A reminder that we get earnings after the bell today from Microsoft and Alphabet (aka Google). Wednesday it will be Meta (aka Facebook), and on Thursday Apple and Amazon.

These report could certainly be a major catalyst in either direction, either propelling the bounce higher, or seeing yesterday's relief rally fail quickly. The reports come after the bell so perhaps the bounce continues another day, although that's no guarantee if investors aren't confident that earnings will bail this market out.

---

The S&P 500 (C-fund) reversed off its morning lows to close with modest gains. Yesterday I mentioned the Jan 24 and Feb 24 reversals as a possible outcome at some point this week. However, the volume during those other two reversals was much higher than we saw yesterday, which makes me a little suspicious. It's not a deal breaker, but something to keep in mind. Generally a capitulation low will impact a lot more investors, so I think we could get a bounce with the help of earnings, but it may not be a low just yet. That large volume bar in March was the quadruple witching expiration day which always comes with a volume spike.




DWCPF (S-fund / small caps) tested its 2022 lows and so far it has held, but we still have some poor formations on the charts, and the bottoms of the flag formation could act as resistance on the way up. The battle may be between 1800 and about 1900.




The late sell off on Friday and late rally yesterday, plus a big gain in the dollar all added up to a lagging EFA (I-fund) yesterday. 69 held, which is a good sign as it was the bottom of an old open gap from early March.




BND (bonds / F-fund) got a bounce but the chart is still negative overall. Even if we do get a rally in bonds, stocks may key off of that and do even better so it's tough to consider the F-fund at this point in the economic cycle.

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.