TSP Talk Blog

Stocks were in digestion mode on Thursday after Wednesday's big rally, and the consolidation continues in this same area that we saw in early June. The Nasdaq led and posted a modest gain but the other indices were slightly lower. Bond prices were up (yields down) and the dollar was down so Tuesday's knee-jerk reaction has been reversed in both.

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It was another quiet day yesterday during this mid-summer period and in front of the July jobs report. We get that report this morning (Friday) before the opening bell and estimates are looking for a gain of 250,000 jobs and an unemployment rate of 3.6%. I don't even know if most of the pros know what they want to see here as far as what would be best for the stock market.

On the one hand a weaker employment number would mean that the Fed's rate hikes may be working on controlling inflation, and that could be some relief, but that would mean that the economy is weakening and a miss in the jobs report would start to solidify the controversy of whether the economy is in a recession or not.

According the the 2/10-year yield curve, we were due for a recession because, not only did we get an inversion back in early April, but it inverted again in early July and it has done nothing but get more extreme since. An inversion is when the shorter term bond yield more than the longer term bond. And this is happening while the Fed is actively trying to slowdown the economy and the jobs market and the first hikes in March may not even have been felt yet.




The 10-year yields spiked up on Tuesday and half of Wednesday after that Fed Talk about staying aggressive with interest rates, but it has since pulled back down below the head and shoulders pattern's neckline.



BND (Bonds / F-fund) did the opposite as it is back above its inverted head and shoulder pattern after that knee-jerk Fed driven sell off on Tuesday, and here it is flirting with the recent highs again.

The dollar also reversed back from that false breakout on Tuesday so, as we speculated on Wednesday, the trends are back on track in bonds and the dollar after the emotional rally earlier in the week. But in this case of the dollar, it is still above support as it remains above its 50-day EMA which has held for months.




The price of oil broke below the prior lows from July and now sits below $89 a barrel. Lower yields and lower gas prices should be a positive for the consumer, and the stock market may like this action although this is not a new development since both are trading near recent lows, and the stock market has been rallying in kind.

Again, sorry for the erratic updating of the share prices and the AutoTracker lately. The TSP has been incredibly flaky about when they post them each day and I am stuck until they do so. Some days, rarely, they post them at 8PM (an hour later than before the website was updated), but more often it is later than that, and sometimes not until early the next morning. It has me checking all night, and it's frustrating. So, bear with us. Hopefully they will figure something out to get back to more consistency.

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The S&P 500 (C-fund) has spent the last 5 days trading within the same range that we saw back in late May / Early June, and it is also continuing to flirt with the overhead resistance of the 200-day EMA. The market feels like it wants to go higher, but it has used a lot of energy in its recent 14% rally off the June lows. At this point I don't know if we will see new lows - although I am on record as saying that it has a better chance of happening in August or September - but even if we don't see new lows, a overbought dip back to the 50-day EMA could get the bulls nervous again. Never dismiss the unexpected though, and the big surprise would be a breakout above resistance before a pullback. It's not what I expect, but since that could fool the most people, it is a possibility.




The DWCPF (S-fund) is in the same situation, and which side of that blue box this settles on may be the next intermediate term direction. I'm positioned for the downside, but again the upside would surprise the most so it's on my mind as a possibility




The EFA (I-fund) had a good day with the dollar falling 0.63%. There's a lot of resistance in the current area so the bulls have more work to do, and it's the bears opportunity to push this lower if they have any designs on doing so.




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Thanks for reading. I appreciate it. Have a great weekend!

Tom Crowley



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