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TSP Talk Market Commentary 01/08/2020

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Stocks dipped on Tuesday, putting a halt to Monday's reversal attempt. The Dow led on the downside with a loss of 120-points, or -0.42%, while the broader indices held up slightly better. Bonds were also down but afterhours we did see a positive reversal there, and further losses in stock index futures after another airstrike in Iraq.

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I didn't see a whole lot of anything during yesterday's action, although those flat to slightly down days do help with the excesses we see in some of the indicators and the extreme bullish sentiment. That was my assessment until after the close when reports of the airstrike hitting an Iraqi airbase that the U.S. troops use.

This may be another knee-jerk reaction - sell first, ask questions later - as the Dow futures were down another 300+ points, but the reports were just coming out so that's all I know as of this writing on Tuesday evening.

We could wake up on Wednesday morning and the futures are back up, but without knowing, it's tough to assess the situation, so I won't speculate. There was nothing horribly wrong with the charts at the closing bell yesterday, except that we did see a pause in the recent relentless pursuit of new highs. But that could change depending how the market reacts at the opening bell.

The December Jobs Report will be released on Friday and estimates are looking for a gain of about 160,000 jobs, and an unemployment rate of 3.5%

Again, there isn't a whole lot of negatives on the charts yet, but we don't know what the geopolitical fallout might be to the action in the Middle East and that could turn some overbought looking charts into breakdowns, so I am going to make this short today and see what develops here.

The S&P 500 (C-fund) dipped modestly yesterday remaining below that middle dash red trendline. The gap remains open near 3205 and may be an imminent downside target should the weak overnight futures hold into the opening bell. It could also mean another gap will be opened below yesterday's low. That rising support line just below 3200 could be a key to whether the trading channel remains intact this week. Right now (Tuesday evening) the S&P 500 futures at trading at 3190.

The DWCPF (S-fund) traded in a narrow range yesterday and held near Monday's highs despite the minor loss. It remains above the rising support line, but with the Russell 2000 overnight futures trading down well over 1% as of this writing, that could be in jeopardy.

The EFA / I-fund was down Tuesday and a strong rally in the dollar added to that downside pressure.

The AGG (F-fund / bonds) was down on the day but after hours bonds were rallying sharply so we call only wait and see. Support is rising and that resistance line above 113 that I mentioned yesterday, is not as strong as a double top since this is at least the 3rd time it had been tested. The resistance gets weaker the more it is tested.

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

Tom Crowley

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