Stocks rallied on Friday heading into what should have been a weekend full of negotiations over the budget and debt ceiling, and investors seemed more concerned about missing a post-deal rally than worrying about the shut down and deadlines. The Dow gained 76-points on Friday but the Sunday night futures are taking away most of that gain disappear after no deal was reached.
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[TD="align: center"] Daily TSP Funds Return[TABLE="width: 163"]
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[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] +0.0063%[/TD]
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[TD="align: right"] F-fund:[/TD]
[TD="align: right"] -0.14%[/TD]
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[TD="align: right"] C-fund:[/TD]
[TD="align: right"] +0.71%[/TD]
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[TD="align: right"] S-fund:[/TD]
[TD="align: right"] +0.77%[/TD]
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[TD="align: right"] I-fund:[/TD]
[TD="align: right"] -0.21%[/TD]
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[TD="align: right"] [/TD]
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Bonds (F-fund) were down, as was the I-fund with the help of the dollar rallying 0.5% on Friday.
The Dow chart (not shown) looks the worst as it has not broken its sharp downtrend since the early September top. But the Dow only has 30 stocks in it so we're more concerned with the broader indices so let's take a look at them.
The S&P 500 (SPY) continues to hold above the 50-day EMA, but it's not exactly bouncing of of it with any authority yet. This chart doesn't look bad as is, but that 50-day EMA must hold or that will change.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq has been resilient as it is just a few points from a 52-week high, and the 20-day EMA has held firmly. When a chart starts in the lower left hand corner, ends in the right hand corner, is above both the 20-day and 50-day EMAs, and near its highs, it's very tough to argue that it is not a bullish situation.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The dollar moved up 0.5% after Thursday's positive reversal day. This strength was important for the dollar as it had broken below some key resistance earlier in the week.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The longer-term chart shows that the UUP has recaptured that support line. While that may be promising for a short-term rally, this chart looks pretty broken over all. If this support can hold however...
Any short-term gains in the dollar will have a negative impact on the I-fund. There are some good and bad signs on this EAFE Index chart. The good news is, there is a big bull flag that is trying to find support at the 20-day EMA. Bull flags tend to break to the upside, but as you can see on this chart, there are several open gaps (red) below that will want to eventually be filled.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Because this EFA ETF is traded on the U.S. stock market, but the underlying countries within the EFA trade overnight, it leaves for many opportunities for open gaps. But even with that, nearly every gap on the EFA chart seems to get filled. If you look closely on the above chart you will see those open gaps all over the chart but only the ones I have pointed out remain open.
The long-term bonds are looking bullish, which is surprising with the debt ceiling deadline looming. There has been a pullback from the late September peak, but there is a clear bull flag trying to hold support at the 20 and 50-day EMAs.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
With the government still in partial shut down, the market is lying in wait with the rest of the country watching to see what develops. We could see intraday spikes in either direction as rumors and news break. The charts are holding up hinting that this may end OK, but the closer that debt ceiling deadline gets, the more nervous investors will be.
In today's TSP Talk Plus report we'll look at several other charts including the small caps, short-term indicators, the shorter term bonds, longer-term dollar, etc. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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