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TSP Talk: More choppy, but mixed action

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Stocks were mixed after a very choppy day of trading. The Dow posted a modest gain of 82-points, while the S&P 500 and Nasdaq were down slightly, but small caps took a 1% loss. The dollar was up, which has been a headwind for stocks, but yesterday oil gave up an early gain to close negative, and that may have helped stocks move off their lows.

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Lets hit the three things that I believe have been having the most influence on the stock market recently, besides the obvious.

The dollar was up, and that is a very bullish pattern called a cup and handle, and a strong dollar can be trouble for the stock market, and also an anchor for company earnings that do business globally. If this formation breaks out to new highs, as the cup and handle tends to do, then stocks will have to deal with more headwinds.

The price of oil was actually up sharply early on Wednesday but it flipped over and closed down almost 2%. That's the good news. The bad news is the selling was blamed on more weakness in the economy, which assumes a decrease in demand. Still, we know that supply has been the issue so I think the support at the 100-day EMA could have been a short-term low and perhaps we will see some choppy but positive action like we saw in April as investors battle over the supply / demand issues.

The High Yield Corporate Bond Fund was down again. Not much, but there was no bounce after the sharp two-day sell off and this is just a bad looking chart. Perhaps the only good thing we can say about it is that may be getting close to oversold. This is an indication of the condition of the credit markets and the stock market tends to follow its lead.

We have another 3-day weekend coming up with Monday being the 4th of July (and the TSP is closed) but with two trading days left leading into the holiday we have to be on the lookout for a pre-holiday reversal, if the pullback to start the week isn't it already, because we had a nice rebound going until this week. I'd expect the main trend to continue after the holiday, and I think we have to say that trend is down.

The July seasonality charts look very promising, at least for the first half, but being in a bear market we may not be able to count on this. Most days in the first half of the month show a percentage of times positive of more than 50% with some in the mid 70% area. That's fantastic, but that means they are down 25% to 50% of the time, and if we looked at this data from only during years with bear markets, it may not look this good. So yes, this is a general breeze at the back of the stock market for the next two weeks, but it may take a stiff blowing wind to shift the current bearish trend.

Chart provided courtesy of

We get the initial jobless claims data this morning, as well as the Chicago PMI. Both could be market nudgers. But it's not until mid-July before we get the inflation telling CPI and PPI reports, then earnings season will kick in soon after, oh and another 0.75% rate hike from the Fed.

The S&P 500 (C-fund) was down slightly but the lows of the day were able to fill in that small gap near 3800. The recent rally stalled at the 20-day moving average (green), just like it did in April. It turned back down before filling in that open gap near 4000 - the gap that many investors were assuming could get filled during the recent rebound, but the market never fails to disappoint those who expect the obvious. Gaps tend to get filled sooner rather than later but now that that one has been open for about 3 weeks, you never know. It could take a week, a month, or a year.

The DWCPF (S-fund) also filled in its small open gap below 1600. The positive reversal day could be telling us we could see another day or two of upside action, but that bear flag (orange) is not a good sign for the next bigger move.

The EFA (I-fund) is at the mercy of that dollar which looks very perky and that is bad news for the I-fund. The bear flag is bad enough but the two together suggests more downside. Of course as I mentioned above, the market doesn't tend to do the obvious, so maybe...?

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

Tom Crowley

Posted daily at

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.

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