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TSP Talk - Apple steals the show - CPI and Fed next

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Stocks opened sharply lower on Tuesday as it appeared there were some nerves in front of today's Fed decision on interest rates, and the CPI report, plus European stocks were down sharply overnight. But as has been the case repeatedly, what we see at the open has not been what we saw at the close as stocks rallied back and the S&P 500 and Nasdaq both closed at new highs, thanks to Apple. But what about the rest of the market, because the S and I-funds were down again?

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Apple must have been getting tired of hearing about Nvidia's surge because the move in AAPL yesterday may have been the largest one day increase in their market capitalization. So we continue to see the world's largest companies grow at an incredible pace, while the rest of the market is sitting on the couch eating popcorn and watching the show, because they aren't participating.

So here's what happened to Apple yesterday.

And the S&P 500 made a new high but it was only up a modest 0.27%. That's a decent daily return but when a top 5 stock in the index jumps over 7%, 0.27% is almost a disappointment.

The Nasdaq was up 0.88% so it took more advantage of that gain, but look what the Equal Weighted S&P 500 stocks did.

That's the same 500 stocks, but with each stock considered equally, and that index was down 0.39% on the day, so yes it was all about Apple yesterday, while the rest of the market seems fatigued.

And yes, our S-fund (DWCPF ) which basically contains are all US stocks that are not in the S&P 500, was also down on the day, although it also had a nice push off the lows yesterday, but it is still in a downtrend and certainly not making new highs like the S&P 500.

I can't seem to go a day without mentioning the negative divergence in the market leading Dow Transportation Index. There was a big rally on Monday but gave most of that back yesterday and remains in a troubling chart formation.

Yesterday the financials struggled and broke down from what looks like bear flag, although it did try to hold at the previous lows, so we'll see if there more buying interest in this area.

The 10-year Treasury Yield was down and that helped the market, but again the small caps were not impressed.

The dollar was up again but the it was not large enough to justify the size of the loss in the I-fund yesterday. There's something going on across the pond, perhaps the election results - I don't know, and it may be what's causing the opening here in the US to struggle early, but once the overseas markets close, the US indices have been reversing.

I know I sound really bearish, and I am invested cautiously, but if the large tech stocks were all heading lower but the broader indices were putting up great data, I'd be saying the opposite - that something good is happening but it's not showing up in the big indices, nor in the headlines. I'm trying to point out what may not be so obvious to those who just see the headlines.

We'll get the CPI report today before the opening bell today, and the FOMC meeting and decision on interest rates should be about 2 PM ET. Then tomorrow we'll get the PPI. It seems many people, at least the cheerleaders on TV, are all expecting good things, but I don't know. Maybe they're right.. But the internal weakness outside of the behemoth Apples, Nvidias and Microsofts, must be trying to tell us something?

The S&P 500 (C-fund) made a new closing high yesterday with all the thanks going to Apple because there were 3 stocks up yesterday for every 4 that were down. That includes both the NYSE and the Nasdaq. In just the NYSE it was a 10 up, 17 down ratio. So, good for the S&P 500 and the C-fund, because it got paid no matter who is making it the money, but how should we interpret this divergence?

The EFA (I-fund) was down over 3% at one point yesterday so it scrambled back after testing the 50-day EMA to a more manageable loss of 1.2%. The strength in the dollar wasn't much of an impact. The reason for the steep loss, according to CNBC, was that investors were looking ahead to the was looking "ahead to the Federal Reserve’s next meeting and U.S. inflation data." Yeah, sound like a good reason to fall 3% in the morning. I think it may have had something to do with the elections?

BND (bonds / F-fund) rallied on the drop in yields. As I mentioned yesterday, there are several open gaps in the area and it could make the bond market choppy, and the Fed and CPI may help fill some of those gaps today.

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

Tom Crowley

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