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TSP Talk: Sigh of relief in stocks, but here comes the data

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Stocks rallied to start the new month with the Dow adding 153-points, and gains of 1% or more in the more broader indices. The dollar was down sharply, in an odd looking day of trading, and that helped the I-fund lead for the first time in a while. And small caps regained Wednesday's losses and is flirting with a breakout from a large trading range - as is the S&P 500. Bonds were up as yields fell again.

Daily TSP Funds Return
Was it a celebratory rally after the debt deal passed the House of Representatives? Maybe, but the recent losses were caused by the fear of a default by the US government, and that doesn't look like it is going to happen, although there is a snag in the Senate with military spending so maybe we shouldn't count our chickens yet.

Today all eyes will be on the May Jobs Report, which may be out before you read this. Estimates are looking for a gain of 190,000 jobs, and an unemployment rate of 3.5%, so any major surprises could create another big move in the market. With the next Fed meeting coming up in less than two weeks, the "will they or won't they" hike debate will be all we hear about, and the economic data that we get in the interim will be hyped.

I'm not sure what happened in the dollar yesterday exactly, but the ETF that I use (UUP) to follow it sure had a strange day. The dollar itself was down 0.71% but UUP was down 1.19%, and the difference would be a timing issue with the futures vs. the cash market trading of the ETF. But the UUP had a very strange midday spike down and reversal low that filled a bunch of open gaps. The question is whether this was a data error or not, or did something actually happen? The reason I care is because I wonder if those gaps are truly filled now. I saw two separate quotes of UUP showing the odd spike. By the way, the loss in the dollar helped the I-fund come out of its recent funk.

The 10-year Yield Treasury Note was down again helping the F-fund to another gain, which I will show down below.

I don't want to get too caught up in yesterday's action since it could have been just a debt ceiling relief rally - time will tell - but we haven't talked about the inverted yield curve in a while. - Now aren't you glad you stopped by today? Ha! :^D

This 25 year chart of the 2/10 year yield curve vs. the S&P 500 shows us something quite interesting. Previous inverted yield curves (or near misses like 2019) did not seem to trigger any selling in the stock market at the time they were inverted and bottomed. It was when the curve started to steepen (go up again) that we saw the damage done to stocks. And it wasn't usually right away, but a few months later.

The yield curve did bounce off a recent low, but it has dipped back down a bit so it's too early to say if the low is in, but this will be something to keep an eye on.

As goes Apple... Just another reminder that the stock market has a tendency to eventually follow the direction of Apple. Not in the same percentages of gains and losses, but direction. Well, Apple is on the verge of breaking out to a new all time high. We could see a double top pullback, but going back several years, that hasn't been typical.

The "story" out there is still concerning, but there is a lot of money on the sidelines that have been buying the dips keeping the stock market more buoyant than most have expected.

The S&P 500 (C-fund) closed at a new high for the year yesterday. Most of these large positive candlesticks have been getting retraced rather quickly, but it has actually been more common to see two large positive candlesticks before that happens. The jobs report will likely do one or the other - retrace yesterday's positive candlestick, or create a second one.

The DWCPF (S-fund) popped back above its 50-day EMA, which is a bullish move, but there's no real change to the fact that it is in a large trading range that has a bear flag look to it.

The EFA (I-fund) had a big day and led the pack as the dollar finally broke down after Wednesday's double top negative reversal (see UUP chart up top.) There are plenty of opens gaps above and below but the 50-day EMA near 72 and the reversal low near 70 seem to be the prices to watch for now.

BND (Bonds / F-fund) was up for a 4th straight day as it had no problem scaling above the 50 and 200-day EMAs yesterday, after holding at the 200-day simple average (orange) last week.

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Thanks so much for reading. Have a great weekend!

Tom Crowley

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S&P500 (C Fund) (delayed)

( Real-time)
DWCPF (S Fund) (delayed)

( Real-time)
EFA (I Fund) (delayed)

( Real-time)
BND (F Fund) (delayed)

( Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes