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TSP Talk - Just another positive Monday

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Stocks started the new week with a solid gain with big tech doing most of the lifting. It was the 10th consecutive positive Monday. The only negative day to start a week since before the 4th of July was the Tuesday following the Labor Day 3-day weekend. The Dow gained a modest 87-points, or 0.25%, while the S&P 500 gained 0.67% and the Nasdaq led with a gain over 1%. Small caps lagged as they didn't have big tech to help them. Bonds were down as yields moved higher, and the dollar was down sharply helping the I-fund.

Daily TSP Funds Return
Oracle disappointed investors after the bell last night and was trading down about 8% and that could impact tech today, but they aren't the market mover that they once were.

The action yesterday was bolstered but strong gains in big tech and we can see that difference when we compare the S&P 500 with the S&P 500 Equal Weight Index (which are the same 500 stocks but all companies equally weighted.) The S&P 500 gained 0.67% and the equal Weighted version was up just 0.16%. Of course the TSP's C-fund tracks the S&P 500 so it got the 0.67% gain so what do we care if we're in the C-fund? But I note the RSP action to show that internally the market was quite as strong as the indices suggest.

And the QQQ is the large cap tech ETF and it outperformed with a again of 1.17%.

The dollar pulled back from its tremendous rally off the July lows, and that weakness did help stocks yesterday, particularly the I-fund.

The I-fund, or EFA anyway, led the TSP funds yesterday with a gain of about 1%. We'll have to see if the TSP matches that gain when they post their prices, since the I-fund tracks the EAFE Index and EFA is the fund that tracks the EAFE.

Of the market leaders that we've been watching, Apple did gain 0.66% on the day, the Dow Transportation Index gained 0.51%, and the Russell 2000 was up 0.24%. Not exactly jumping compared the major indices funds, but at least they all were up on the day.

I am still watching and waiting to see if Apple fails once it fills its open gap (red), or tests the 50-day EMA (purple.) As goes Apple, usually the market goes the same way. By the way there is also a large open gap down by 166 from May, but it is not shown on this chart.

Monday's volume was still on the light side so we're still experiencing some late summer type of trading. The CPI comes out on Wednesday and that could be the highlight of the week and start to boost trading.

The S&P 500 (C-fund) gapped up on Monday, did some backing and filling to basically fill the opening gap, and the 20-day EMA held at the morning pullback lows. This looks pretty good here but the pennant like formation may mean we could get some back and forth as it tests the converging support and resistance lines. A breakout to the upside of the pennant would be typical in a bullish market, and this is still considered a bullish market since the recent consolidation is coming off those late July highs. If it does break out, the open gap near 4560 would likely get filled, but then what? It could be a trap, or just the next step toward new highs. As I have said before, there are some very strong points on both sides of that argument.

DWCPF (S-fund) was up but it lagged and the head and shoulders pattern is much more defined and potentially dangerous on this chart. That said, I explained the other day that head and shoulders pattern can hold at the neckline when the pattern develops in an ascending chart. It doesn't have to break down. Breakdowns are much more common in bear / descending markets, which this is not -- at least yet.

BND (Bonds / F-fund) was down again as yields ticked higher. The CPI report could get this chart to fill that gap if the report is inflationary. Or, if the CPI is benign, maybe this may start carving out a low, and the 70.25 would be a bottom? I think bonds could be a good play at some point in the fourth quarter, but we could have better opportunities in stocks if yields do come down.

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

Tom Crowley

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S&P500 (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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Yahoo Finance Realtime TSP Fund Tracking Index Quotes