TSP Talk Blog

Despite Powell reiterating the Fed's hawkish persistence in raising rates as needed, stocks resumed their rebound on Tuesday. The Dow jumped 431-points or 1.3% and, the broader the index, the bigger the gains were. The questions is, how long can the bear market rally party last? Bond yields were up / bond prices down, and the dollar tumbled helping prices everywhere, although the price of oil did pull back.

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The weakness in the dollar yesterday had a bullish effect on prices and as we can see the trend has been up over the last month and a half and the stock market had been paying the price. The 0.83% loss is a good sized move but is this the start of a trend change or just a pullback to the bottom of its ascending channel? The answer to that may determine the size of this bear market rally. There are some open gaps below that channel so there are arguments for a more pronounced pullback.




The price of oil was an exception yesterday as it dipped after a strong 4-day rally. It looks like it could be impacted by the resistance in the 113 - 117 area, but a break above that would open the door to a test of March's highs. And the reason this is significant is because the higher gasoline prices have been acting like a tax hike on consumers.




I see the futures opened higher on Tuesday evening so we are getting to the point where the typical rebound in a bear market could be getting long in the tooth, but some of those bounces turn into outright bull market rallies like we saw in March, and that's what most of us are trying to figure out right now. The S&P is now 6% off its lows and that good relief rally. Market timers who are enjoying these gains certainly don't want to give them back, so as good as it looks out there, there are a lot of us timers walking on eggshells with each move higher.

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Update: The TSP will stop processing IFTs after noon ET on May 26 through the "first week in June." What exact day the first week of June is, I don't know yet.

More: https://www.tsp.gov/new-tsp-features/key-transition-dates

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The S&P 500 (C-fund) jumped 2% yesterday, resuming the bounce off of last week's lows. Some stiff resistance between 4100 and maybe 4150 could get tested on any further upside action, and the result of that test could determine the magnitude of this bear market rally. The index is now just over 6% above last Thursday's lows. That's a decent bounce, but a bear market rally could go further. This looks like an important juncture.




The DWCPF (S-fund) continues to be more volatile as the gains and losses exceed those of the S&P, so if you're on the right side of that move, the S-fund is the place to be, but if things turn sour, it will likely be high beta losses for the small caps.




The EFA (I-fund) bounced above a couple of key resistance levels thanks to that decline in the dollar yesterday. If it can hold above 68, and there is an open gap down near 67.40, we could get a test of the 50-day EMA, which is a gift in a bear market - if you're brave enough to go for it.




BND (bonds / F-fund) fell lower yesterday taking the steam out of last week's rally in bonds as yields ticked higher. Still no signs that the bond market is ready to be bought.

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

Tom Crowley

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