I heard some very smart people on TV say that if a deal isn't reached and the government shuts down (partially), the stock market will open down 200 to 300-points. Looking at the history of shutdowns, we knew that was not typical so we weren't too surprised that the Dow was able to close up 62-points yesterday.
[TABLE="width: 80%, align: center"]
[TR]
[TD="width: 310"]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 160"]
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[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] +0.0070%[/TD]
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[TD="align: right"] F-fund:[/TD]
[TD="align: right"] -0.10%[/TD]
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[TD="align: right"] C-fund:[/TD]
[TD="align: right"] +0.81%[/TD]
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[TD="align: right"] S-fund:[/TD]
[TD="align: right"] +1.37%[/TD]
[/TR]
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[TD="align: right"] I-fund:[/TD]
[TD="align: right"] +0.44%[/TD]
[/TR]
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[TD="align: right"] [/TD]
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Those "smart people" who expected the big drop don't understand that the market loves to throw curveballs and so they were looking for the fastball, and we saw this play out as a "sell the rumor, buy the news" reaction. The Transportation stocks, the Nasdaq, and the small / mid-cap stocks ramped higher. This pop could be short-lived but it showed that emotional reactions to the market are usually wrong.
The S&P 500 (SPY) followed through on the upside reversal on Monday, to close back above the 20-day EMA. All of the recent open gaps have now been filled. The problem here is it is lagging many of the indices that are near or at new highs. But the S&P is a follower, not a leader, so it's not that bad.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq jumped over 1% on the way to making another new 52-week high for this leading index. The only negative here is the rising resistance line which is not far away.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Transportation Index is the market leader and it saw a big 1.4% gain yesterday. Like the S&P, it's not at new highs yet, where you'd want to see the leader, and I do see a pattern where big positive days don't always get more upside follow-through. More often than not, in the last few months, the Transports have pulled back (red) to consolidate the big 1-day gains. There were a couple of exceptions (green).
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bond prices and the F-fund moved slightly lower yesterday, sending yields higher.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The 10-year yield is still in a descending trend, but a move up to test the 50-day EMA is a good possibility which would give the F-fund some very short-term difficulties. But the bigger trend here is yields down, and bond prices and the F-fund up.
The September jobs report is supposed to be reported this Friday but it has already been said that it will not be released if the government is still not fully funded.
In today's TSP Talk Plus report we'll look at a longer-term chart of the S&P, the small and mid caps, and an interesting sentiment chart that looks at Wall Street analysts stock price adjustments. 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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