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TSP Talk: Stocks repeating themself - even after hours

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The market could not find a bid yesterday and we saw selling almost across the board. Large caps, small caps, Tech, Transports, etc., were all down sharply as the debt ceiling panic grows and the deadline gets closer. The Dow lost 256-points and there were similar percentage losses in the S&P 500 and Nasdaq. However, something happened after the closing bell that may change things at least for the start of today.

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Nvidia (NVDA) was up over 25% after hours last I checked after reporting earnings. That was enough to take the Nasdaq futures from a 70-point loss at the market close on Wednesday, to a 114-point gain by the time the futures close after those earnings were released, or a 184-point gain in those futures on Wednesday evening. QQQ = Nasdaq 100 Index. That certainly shook things up.

The S&P 500 futures moved up about 23-points. Not as big of an impact, but it did cut yesterday's losses more than in half if that gain holds into this morning's open bell. Nvidia is the 4th heaviest weighted stock in the S&P 500 so it will definitely help here.

If we do get a rally today it will keep this odd repeating pattern alive. After that 7-day - up and down stretch at the end of April and into early May, we got the April jobs report that triggered a big rally. Will Nvidia have that same kind of impact following this current similar pattern?

The question is whether the broader market will follow because we know the small caps and Transportation index have had a mind of their own this year. The small cap Russell 2000 futures were not bouncing after the close.

The recent parabolic rise in the dollar has weighed heavily on the EFA (I-fund) and yesterday the EFA really gave out with a second gap down day.

Why is the dollar rallying in may after being pushed lower for months? Perhaps the Fed's balance sheet is the answer. The Federal Reserve reversed course on their balance sheet when the bank failures started back in March. Fast forward two months later and they are back to reducing their balance sheet at a sharp pace, and since then the dollar has gained strength.

The debt ceiling deadline is a moving target but most are talking about Janet Yellen's statement of June 1st as the date. They could kick the can down the road by a few weeks because corporate earnings will be rolling in by the 15th of June, adding a lot more revenue and reducing the deficit for a little while anyway.

Still, it's obviously a big deal and the market shrugged it off for a while, but the closer we get to June 1, the more fear is being displayed. In 2011 the market did not do very well under a similar debt ceiling count down. We'll have to see what Nvidia's impact will be on that fear today.

The S&P 500 (C-fund) has that 7-day pattern going for it that I illustrated up top, but there were two negative developments yesterday - the rising support line off the March lows was broken, and the PMO indicator crossed back below its moving average as that keeps flip flopping. It did hold at the 50-day EMA for a third time in recent weeks. The question is whether it will be enough to get it back above that support line near 4150. As I said, Nvidia is the 4th heaviest weighted stock in the S&P 500.

The DWCPF (S-fund) lost almost 1% on the day, which is bad enough, but the bulls did not want to see this close back below the 50-day EMA while in this large bearish formation. Small caps futures weren't popping like the S&P and Nasdaq futures were so it could be the laggard today.

BND (Bonds / F-fund) gave up Tuesday's gains and now it closed below the long term support line. This may turn around if and when a deal gets done in DC.

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

Tom Crowley

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