Another fake out / breakout yesterday but stocks did not completely fold despite the negative reversal.  More strong economic data pushed yields up but as we have talked about for several weeks now, that was likely going to happen heading into the election.  Still, the bond market reacted negatively (yields up) to the strong retail sales numbers and the better than expected initial jobless claims, which were much lower than expectation.  Big earnings from Taiwan Semiconductor also helped push stocks higher at the open.  But it didn't hold.

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The market was expecting over 270,000 initial weekly jobless claims and it was much lower at 241,000.  That's good.

Retail Sales were expected to see a gain of 0.3% last month and we got 0.4%, and if you take out Auto sales it was 0.5%, so the data continues to look good.

That strong data sent the 10-year Treasury Yield back up to its 200-day EMA, where it stalled last week after filling in that old open gap from August 1.  Will resistance hold and reverse yields lower to fill in the gaps below, or will the trend remain higher and break through resistance?

      


After a big rally in airlines stocks sent the Dow Transportation Index to new 2024 high on Wednesday, the railroad stocks fell yesterday creating what could be a failed breakout, but it's still close.  This chart continues to intrigue me as these recent highs actually go back about 4 years, failing every time that it gets here, so this market leader has been a train-wreck (pun intended) and needs to get past this area.

      


A soft landing is what most economists and investors have been expecting for the economy.  But is it a certainty?  According to this chart, the term "soft landing" has been getting mentioned at record levels in recent months.  We haven't heard it this much since right before the prior major recessions.  Notice the lag, however, so don't get too comfortable yet.  A soft landing means a slow down in the economy after Fed rate hikes, but not a recession.

   


China and Hong Kong markets continue to pull back from their recent Chinese stimulus driven rally.  The TSP has never been invested in China, and they are moving out of Hong Kong stocks this year, so this hasn't been a major issue for the I-fund, but it is a possible global issue if things get out of whack.  Right now they seem to be consolidating those obnoxious gains.

         


After the bell yesterday Netflix reported earnings and was trading up up 3.5% after hours, but it has doubled in the last year and is probably more due for a pullback than another leg higher.  It used to be the "N" in the old FANG group of stocks, but it's not really a major market mover, although it could help the Nasdaq today.  The index futures were up ever so slightly after hours on the news.
 

The S&P 500 (C-fund) had another false breakout from that rising wedge pattern yesterday.  The apex of the wedge is narrowing and will have to pick a direction eventually.  I suppose it could remain in that wedge until the election, but that rising blue support line may force its hand earlier.

         


DWCPF (S-fund) was down after a new high was made near the open, but it has now remains above the breakout line for 5 straight days.  It could easily come back to test that line, but the support from that line gets stronger every day that it holds.

       

The I-fund:  The EFA was up 0.01% yesterday, ACWX was down 0.07%, and the "ex USA ex China ex Hong Kong Index" was up 0.07%.  This guessing game for the daily I-fund price may go on through the end of the year as the TSP transitions into the new tracking index, which is supposed to eventually mimic the "ex USA ex China ex Hong Kong Index."  You can see the TSP's eventual final daily price and return posted on our site each evening. 


BND (bonds / F-fund) fell down to fill in the small open gap (blue) after that strong economic data yesterday.  So the chart did some backing and filling cleanup yesterday, but will support continue to hold?  It now has two open gaps above to take care of.

        


Thanks so much for reading!  Have a great weekend!

Tom Crowley


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