TSP Talk Blog

Stocks paused on Tuesday after last week's strong rally. The Dow took a big 372-point hit on the day led by a 6% decline in Goldman Sachs, which is the second highest weighted stock in the index, and 24 of the 30 stocks were down in the index. But the broader indices held up rather well with more solid internal numbers considering the red we see on the indices. The dollar and yields were up and that helped put the pressure on stocks.

Daily TSP Funds Return More returns

Here's those internal numbers with breadth showing more up issues than down yesterday on both the NYSE and the Nasdaq, and the Nasdaq volume breadth was very positive as tech stocks have been very strong to start 2023 - something we didn't much of in 2022.



If high oil prices was an issue in 2022, we have a little warning here as the price is now peeking above $80 and the 50-day EMA, as well as the longer-term descending resistance line. Should this hold above that resistance for a couple more days we could see 86 before you know it, so it will be interesting to see if this January rally in stocks can continue should that happen.




Here is the Dow Transportation Index, a good indicator of economic strength in the US. It's had a big rally this year like everything else, but here it is at the top of a large bull flag. It could flip over to test the bottom of the flag again, but since bull flags tend to break to the upside this has some bullish possibilities. Yesterday after the bell United Airlines reported strong earnings with solid guidance and that could help push this above resistance. Being one of the market leaders, the reaction here could infect the other indices.




Early January has a decent record over the last 30 years and we just got past the first couple of weeks. There can be a swoon toward the 3rd week or so which could bring it to the end of this week, but the rest of the month is a little better than average, generally pushed by the successes and failures of earnings announcements that will start to come in more heavily next week.


Chart provided courtesy of www.sentimentrader.com

The post MLK holiday week and the chart above suggest that this is a week for potential profit taking when there is a strong start to January. The problem is, many pundits suggest that the bear market is going to resume at any time now, so the dilemma for all of us, depending on your current positioning, is whether take profits from the recent rally, buy more on any dip this week, or just stay the course - whatever your course is.

Because we only have a couple of trades per month it limits what we can do but I would probably be doing something different if I did have more transfers available. Right now my outlook is mostly wishy-washy so I am reluctant to get too extreme with my allocation, neither all in into stocks, nor all out.

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The S&P 500 (C-fund) was down modestly but the negative reversal right at the 200-day averages is a little concerning, although perhaps not so surprising. A stall is one thing after the indices had gotten overbought, but whether it flounders in this area or outright drops is the questions. Now that it is over 3900, I would look for that area, and perhaps 3955, to try to hold as support.




The DWCPF (S-fund) managed another gain as we see the broader indices holding up well, but look where it ran into trouble. That is the 200-day EMA.




The EFA / I-fund led on the upside, despite a rally in the dollar, so this continues to be the leader of the TSP funds. It's at some potential resistance but that resistance is rising every day. On a pullback I'd look for support to try to hold in the 69 area. While looking healthy, this is fairly stretched to the upside and if the dollar sees any kind of rebound, it could give the I-fund a reason to pull back.




BND (bonds / F-fund) was down yesterday coming off the recent highs. It remains above the 200-day moving average and yesterday it found support at the prior closing highs since the breakout above 74.




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

Tom Crowley




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