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TSP Talk: Bears flip morning rally, but bulls still fighting

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Another mixed day for stocks on Tuesday with the Dow down, the S&P 500 and small caps flat, and the Nasdaq rallying again. Neither side (bulls / bears) really got what they wanted, however the bulls appreciate that 4200 held on the S&P 500, but the bears go into Wednesday with a negative reversal momentum on their side. Bonds rallied as yields rolled over, and the I-fund continues to lag, even through the dollar was down slightly.


Daily TSP Funds Return
We had a couple of possible outcomes Tuesday after a debt deal was agreed upon, but they still have some I's to dot and T's to cross before it is a done deal. We could have seen some kind of euphoric reaction, or a sell the news reaction, but instead we had a little of both, and then something in the middle.

The market opened moderately higher as the futures were up quite a bit before the opening bell - particularly the Nasdaq. But once the opening bell rang we saw some of that selling of the news and many of the indices turned red, however there was a bid under the market and some buying came in to push the S&P 500 back to breakeven by the close. So, I'd have to say neither the bulls nor the bears had much of an advantage, and the battle may be between those who think we've come too far too fast - especially in big tech - and those who have missed the recent rally off the March lows and are looking to put money to work on dips.

The 10-year Yield Treasury Note fell sharply so we did get a big rally in bonds and the F-fund yesterday. The support line broke so this action could have some legs, although there is a small open gap above that could try to get filled before going further down. The dollar was also down, although just slightly so it didn't have much of an impact, but it too may be breaking its rising support.




The bears are pointing to Nvidia, who sparked the rally late last week with a beat on earnings and positive guidance. It gapped up again on Tuesday morning and it became a trillion dollar market cap company at its highs, but you can see the negative reversal it had, and that looks a little worrisome. It certainly can use some profit taking and consolidating with those gaps below, but it's too early to say if this is a peak or not. Maybe a temporary one, but investors will still want in on this AI semiconductor stock for the long term.




The Dow Transportation Index was up for a third straight day, although it continues to lag the other indices. It is testing the overhead descending resistance line right now, so this is a big test in that 14,000+ area.



The smalls caps of the Russell 2000 had broken through its descending resistance line earlier in May, and while it has been rallying off the lows, it still has a bear flag look to it, so it has more to prove.

The price of oil fell sharply yesterday as the question of summer demand here, and in China, is weighing on it. There's a big OPEC meeting this coming weekend that could make or break this chart as fell below 70, and it hasn't spent a lot of time in the 60's for quite some time. It was just those double bottom lows that held a few weeks ago. Lower oil means lower gas prices, which would help the economy. It's like a tax cut for all drivers and commuters when it's low, but it is also a barometer for the economy.




We saw some good action in the High Yield Bond Fund yesterday, and that's usually a good sign, and the question after yesterday's break of support in bond yields and the dollar is, will it continue? I think these questions may determine if the S&P 500 can continue to hold near, or above, its recent highs.

We get the May Jobs Report on Friday and estimates are looking for a gain of 190,000 jobs, and an unemployment rate of 3.5%, which would be a tick up from the prior month's 3.4%. Those numbers sure don't sound recessionary.






The S&P 500 (C-fund) made an new high at the opening bell yesterday but it didn't take long for the bears take over. It did close flat and above 4200 which is a noticeable victory for the bulls. The PMO indicator is back above its moving average but the choppy action recently has been making it difficult to trust any short-term move. Anything above 4200 and the bulls remain in charge. 4100 may be a downside line in the sand.




The DWCPF (S-fund) was up but like most indices it experienced a negative reversal day yesterday, and it was right near the overhead resistance. It's getting close to now or never for this fund to breakout to the upside, get out of that bear flag, and join the S&P 500 in the rally.




The EFA (I-fund) continues to pullback as it tested last week's lows. There's open gaps above and below, which is common for this fund, but 71 looks like immediate important support, and now 72.50 could be resistance. If the dollar does rollover like yields did yesterday, we could see a slight wind at the back of the I-fund again.




BND (Bonds / F-fund) continued its bounce off the 200-day moving average, and the reversal in yields yesterday may suggest that the F-fund is ready for more of a rebound.




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

Tom Crowley





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S&P500 (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
BND (F Fund) (delayed)

(Stockcharts.com Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes