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TSP Talk: Choppy, quiet action to start the week after last week's big rally

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August starts out with some choppy action that ended with modest losses in stocks. The Dow lost 12-points and the S&P 500 lost about a quarter of a percent while the small cap fund was flat, and the I-fund led with a decline in the dollar. Bonds were up as yields slipped lower.

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I apologize, but I have some things going on over the next couple of days including being on the road and I will have to be quick on the daily commentaries. Fortunately there wasn't a lot going on yesterday so the action was relatively quiet, albeit choppy, and the indices traded in a tight range following last week's wild week of Fed rate hikes and key earnings reports.

We saw yields fall again yesterday (bond prices and the F-fund up.) The dollar was down so we saw commodities like gold and silver rally, but oil and copper were down sharply, and they likely fell for the same reason as the drop in the 10-year Treasury yield - that is the prospects of the rate hikes weakening the economy.

The S&P 500 (C-fund) was down slightly and remains in that area where we saw consolidation after the late May rally and before the early June sell off. The action has been good but many of the short-term indicators are extended to the overbought side, and sideways to slightly lower movement in stocks could alleviate that problem without a sell off.

However, we are still in a bear market environment, despite being down less than 20% now, and it wouldn't be too surprising to see a bearish outcome. The one thing that stocks and the bulls have going for them right now is some of the relentless negative sentiment that we are seeing from investors which, because it is a contrarian indication, could continue to feed a rally. However there is a lot of overhead resistance on many charts and it's just tough to make a call either way.

I'm staying on the defensive and will reevaluate if we do get some kind of early August pullback.

Earnings will continue to come in hot and heavy this week, but most of the game changers have reported already.

On Friday we'll get the July jobs report. Estimates are looking for a gain of 250,000 jobs and an unemployment rate of 3.6%.

Thanks for reading. I really appreciate you! And again, sorry for the brief commentary. I will leave Monday's more in depth commentary below in case you missed it. We'll see you back here tomorrow.

Tom Crowley


Stocks came into Friday following the Thursday after hours earnings reports from Apple and Amazon who both impressed analysts and investors, and that momentum sent the indices higher on Friday. It's been a heck of a bear market rally, but now that some overhead resistance is getting taken out, the debate about whether this puts in a bottom for the market or if it is just the latter stages of a bear market rally, starts to get serious. The Dow gained 316-points with the Nasdaq leading and small caps lagging a bit. Bonds were up, and the dollar was down.

Daily TSP Funds Return
After a choppy start on Friday, the bulls took charge and spent the afternoon pushing some indices to a 7 week high, and the we've seen the indices move up since the recent short-term low on July 14. That's a two-week rally, and since the June 16 lows the S&P has been moving higher for 6 weeks now without making a lower low.

We know what a correction is in a bull market, and I suppose this could be considered a bear market correction if this turns out to be a temporary bear market rally. The S&P is now 13.5% off that June 16 low. Once you're at a point like this in a bear market the battle gets a little more fierce as we approach resistance. Nobody tells us (for sure) if this is the end of a bear market rally or if the lows are in so it's really a matter of making your best guess.

The recent rally has pushed the S&P up to the middle of that late May / early June consolidation period - a possible target area, and we're seeing some resistance get taken out. The 200-day EMA is just above that area at 4188. So there's some room but the overhead resistance should be put to the test this week.

I hate to compare the current market to 2008 because the situation is very different, but since it was a long down-trending market through the summer of 2008, the concern is that the fall of 2022 could replicate the fall of 2008 after the mid-July to end of August rally that year. So far this year it has been a mid-June through the end of July rally. Each bearish looking flag eventually broke down in '08, and some flags held for quite a long time before breaking.

The recent rally did push the S&P above one of the descending resistance lines (blue dashed), but that also happened in May of 2008. But the current action also broke through the upper end of the recent bear flag, and that's something different.

So there are some openings for hope that the lows are in, but if this flips over and and we start to see some of the broken resistance fail again, we'll know that the bulls had been fooled, which happens often during bear market rallies.

The 10-year Treasury Yield dropped again and the push below the head and shoulders pattern and the 100-day EMA are all but confirming the breakdown, and the downside target of a broken H&S pattern would be near 2.3% or even 2.2%. There is an open gap near 2.9% so that will be an ongoing eventual target as well, but it would have to get back above the neckline of the H&S to do it.

Of course as yields fall, bond prices and the F-fund go up, so we have the opposite on our hands for the F-fund, which broke out of an inverted H&S pattern with an open gap down below 76. Bonds tend to outperform stocks in a recessionary period. That has happened this year as well, but unfortunately for the F-fund, that hasn't meant gains, but rather smaller losses.

Here's the August seasonality chart. August is historically one of the tougher months of the year but ironically it was one of the few positive months during the 2008 bear market.

Chart provided courtesy of

You don't want to be the last one out in a bear market rally, nor the last one in when a bear market ends. I won't pretend to know what WILL happen, but I can see several make or break areas on the charts and indicators that will help tell us what MIGHT happen.

The weekly S&P 500 (C-fund) broke above its recent bear flag, similar to the daily chart, and that 200-week moving average continues to hold as long term support. There are a couple of roadblocks just overhead, however.

The DWCPF (S-fund) has shown signs of breaking out but we saw something similar in March before that rally peaked. It also faces some tough resistance at the top of its long-term trading channel.

EFA (I-fund) has been rallying along with U.S. stocks and the weakness in the dollar recently has really helped, but you can see that technically it is below some resistance and remains in a downtrend, and at the same time the dollar is testing some support.

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Thanks for reading. I really appreciate you! We'll see you back here tomorrow.

Tom Crowley

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