Stocks rallied mildly yesterday but ran out of steam and didn't make much of a dent in Tuesday's sell-off.  The Dow gained 9-points on the day and has some work to do.
                              
For the TSP, the C-fund gained 0.18% yesterday, the S-fund was up 0.48%, the I-fund added 0.15%, and the F-fund (bonds) lost 0.22%. 

The next two charts are very interesting.  The S&P 500 saw a sharp drop on February 22, 23, and into the 24th, with a late reversal on the 24th that led to a two-day rally.  We then had Tuesday's big sell-off followed by yesterday's feeble attempt at a rebound, which found resistance that the 20-day EMA. 

                          
                        Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Now let's take a look at the chart of the Russell 2000 from back in January.  Look how similar the action is... 
                        
                        Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

If this rhyme is going to continue, today would be the big rally that pushes the S&P 500 back above the 20-day EMA.  That would be great for the bulls, but if it does not happen, it could be the start of, or continuation of, a consolidation period - as opposed to what happened in January. 

And if there is a reason it would be different this time, it is this...

                         
                        Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

When the price of oil goes up, the price of many other commodities goes up.  I know The Fed is trying to tell us that inflation is not a problem at this time, but when I look at a chart of the CRB commodity index, I see prices rising rather dramatically.                         
                        
                        Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

But do the components of the CRB Index affect your life?  I'd say.  There are a few things in it that some of us use once in a while...

                                          

Rising inflation eventually leads to rising interest rates.  The yield of the 10-year T-Note has been hanging onto that 50-day EMA.  The relatively low yields we are seeing today are basically telling us that inflation isn't a problem, so what is going to give - lower prices, or higher yields?

                        
                        Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Ironically, higher yields would mean a breakdown in bonds, and bonds would probably only break down if stocks rally.  I'm not an economist so I don't exactly know how higher inflation and higher yields would effect the stock market because on the one hand, a weaker dollar and higher inflation increases the price of whatever the dollar buys.  Stocks are one thing the dollar can buy.

On the other hand, when prices go up but salaries don't keep up, consumers are hurt.  When consumers aren't spending, the economy suffers and the stock market would likely fall.

This is all macro-thinking of course, and as far as fundamentals goes, I don't see what is keeping the market up.  But I don't look at fundamentals very often.  I only care about what the market is doing and recently it has been going up.  If the action starts to breakdown in the stock index charts as we have been seeing, then I will become more bearish.  I am almost there, but if the S&P 500 can start to rally again, I'll stay with the positive trend.  

Thanks for reading!  We'll see you tomorrow.

Tom Crowley