TSP Talk Blog

They sold the rumor and bought the news. The Fed raised the Fed Funds rate 0.75% and stocks, which were up sharply before the Fed policy statement was released, tacked onto those gains, but it was a wild day and the indices closed well off both their highs and their lows of the day. The Dow gained 304-pioints, but that's just 1%. Of the 4 major indices, only the Nasdaq gained more than 2%, so after almost a week of daily 2% to 5% losses, the gains yesterday were good, but nothing to write home about - yet.

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Here's an intraday (and overnight) 10-minute S&P 500 futures chart and we can see that we were seeing a change in direction just before Tuesday's close (about 15:00 CT on 6/14 on this chart) and the close yesterday was right in the middle of that new ascending channel. All of the spikes above and below the channel after the Fed decision on interest rates was just noise.




The final gain on the day was respectable, but again the bulls will need to see more to embrace a rebound off the lows.

I showed these two charts below yesterday of the action during the prior two Fed rate hike meetings, but it's important to stress that there is no certainty following a Fed meeting. The S&P 500 was actually up a lot more on the day of those hikes than it was yesterday, but the what happened afterward was not consistent. Stocks are certainly oversold after the recent decline and investors are shaking in their boots, and that may be the good news as fear is in the air.

After the May rate hike, stocks resumed their downside and fell sharply for a week, and after the March rate hike stocks rallied for another two weeks.




There are at least two large open gaps overhead on many of the index charts and filling the lower open gap is the next job for the bulls. As you'll see in the index charts down below, the top of Monday's range acted as resistance yesterday, and that needs to be broken soon if the bulls have any hope for some relief.

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The S&P 500 (C-fund) had a good day but no sign of an obvious reversal yet. A close near the highs of the day would have been a better setup, but it was a Fed day and the traders were going at it pretty good making a very wide intraday range as they battled for position into the post Fed phase. Yesterday' high came right at the top of Monday's range and that kept it below that first open gap. So it's tough to gauge whether it was a game changer from the Fed. The bulls would really need to see some follow through. We are in a bear market and we shouldn't be surprised if we get a bearish outcome, but in the short term, we've seen how strong bear market rallies can be.




The DWCPF (S-fund) also rallied up to the top of Monday's candlestick and the bottom of Monday's open gap. It's back above the May low but there's room both above and below the current level as it sits near the middle of that blue trading channel.




The EFA (I-fund) led the way, if the TSP gives it what the EFA earned yesterday. Just a reminder that the overseas markets were closed hours before the Fed announced the rate hike. I included the UUP dollar chart to show why the I-fund did well, as we finally saw the dollar dip after the 5-day rally.




BND (bonds / F-fund) caught a bid and lo and behold, it's high was near the top of Monday's range just like the stock indices.




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

Tom Crowley



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