For the third day in a row, stocks opened higher, then lost the gains as the day wore on. The losses were not severe, but relative to the early gains, it was a bit harsh. The Dow lost just 9-points, but it had been up over 80 within an hour of the open. Small caps lagged, while the I-fund was down slightly, and the F-fund (bonds) also lost ground.
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A little follow up to the G-fund problem where on Wednesday, for the first time since they went to 4 decimal places on the TSP fund prices, the G-fund did not have an increase in price. It looks like they made up for that with Thursday's closing price. We had been seeing daily increases of about 0.006% and Thursday they added 0.011%.
We know that the market can't go straight up forever and recently the SPY (S&P 500 / C-fund) stopped going straight up. Thursday's low actually hit a level we saw back on August 21, so that's two weeks of basically sideways action. It's also flirting with the mid-July highs. The questions for now are, is that enough of a consolidation, will it continue to consolidate before the next move higher, or will we see some kind of a pullback? Consolidating is never unhealthy, but of course we'd prefer to miss any serious pullback.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow has also been consolidating since mid-August, and unlike the S&P 500, has not broken out to new highs - on a closing basis - over the July highs. If the Dow had continued to move sideways in the 17000 - 17100 range since early July, instead of pulling back sharply, we'd look at this as a positive chart. But the pullback reminds us how fast things can change. In reality, this could be a stretched out inverted head and shoulders pattern.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-Fund) broke below the recent rising trading channel, so that's a red flag, and it is backing off from the overhead resistance from the July highs - another red flag. Like the other charts, it had rallied nearly 6% from the lows so a little pause is not yet an outright cause for alarm, but it could mean some digestion of those gains is coming.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Russell 2000 (small caps) hasn't broken its trading channel yet, but it wasn't moving up in as extreme an angle as the Wilshire 4500. It has a double dose of support near Thursday's lows so a breakdown here, near the 20-day EMA, might be meaningful.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The market leader Dow Transportation Index actually had a big day, although it too closed off the highs. But it did make a new all-time high, and closed at a new high as well. Not a bad sign, except for the possible reversal day. That 8500 area needs to hold.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) was down but managed to close back above the 50-day EMA after dipping below it earlier in the day. The recently opened gap has filled nicely.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The IEF (Bonds / F-fund) moved down rather sharply and is close to testing the old resistance line and the 50-day EMA - two important levels that need to hold for the F-fund.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
We get the August jobs report today (Friday). Estimates are looking for a gain of 223,000 jobs, and an unemployment rate of 6.1%.
Update: August Jobs Report: Jobs added: 142,000. Unemployment Rate: 6.1%. More
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Thanks for reading! Have a great weekend!
Tom Crowley
Posted daily at TSP Talk Market Commentary
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
