‘Phase One’ of the U.S. and China trade deal ended stocks’ three-week losing streak. Well, the promise of progress is what drove stocks higher Friday and out of negative territory for the week. The details of what President Trump called ‘Phase One’ went public 20 minutes before Friday’s close and it sparked the reaction of sales into the close, still putting stocks about where they opened. The deal made for now was essentially China promises to buy more U.S. agricultural products while the U.S. will postpone planned tariffs. Enforcement rules are to be worked out over the next couple of weeks, and intellectual property details were not made public.
The good news is the two countries are working towards a final deal and this small step is better than nothing. The bad news is the markets expected more when Trump said trade talks are going well so indices were left a bit overbought Friday. To add to investors’ worries, the trade negotiations have been anything but stable. We have seen ‘progress’ get derailed before. The technical condition for stock indices has two sides as well. All three of the stock indices that represent the C, S and I fund have open gaps below that could dissuade traders to hold positions or buy more until those gaps are filled. The C and I fund gapped above moving averages so give technical support if prices were to fall back; S-fund did not have the same luck.
Bonds fell more than 1% this week with progress in a trade deal relieves recession fears amongst investors. Trade is moving forward, consumer sentiment is up and mentions of progress in the Brexit deal have investors excited about potential outside of bonds. We know that one bad headline has the potential to send investors running for safety again.
The I-fund led the TSP funds with a gain of 2.31% while the C and S-fund were up less than 1% for the week.
Here are the weekly, monthly and annual TSP fund returns for the week ending October 11th:
The SPY (S&P 500 / C-fund) traded mostly within the falling trading channel for most of the week, filling open gaps left behind. The action was below the 50-day EMA and was headed for a fourth week of losses. Then, President Trump announced trade talks were going well between the U.S. and China. This got investors who had feared the cost of a continued trade dispute on the economy excited. Stock jumped higher Friday and rose higher until the details of the trade negotiations were released near the close and stocks sold off to the opening price. Investors were left a bit unsatisfied by the mini-deal made but it’s hard to sell to much on any progress. The moving averages are now below the current price to hold as support if the index fills that open gap early next week. The C-fund was up 0.66% for the week.
The Dow Completion Indices (S-fund) difference was the price only traded momentarily above its 50-day EMA and fell back below it and the 200-day EMA at the close. But the index didn’t lose all the gains since the opening price Monday like the SPY. The top of the falling trading channel may be a spot to watch for support if the index fills the open gap soon. The S-fund was up 0.64% for the week.
EFA (EAFE Index /I-fund) jumped up on the mention of a chance of Brexit deal from Prime Minister Boris Johnson and Leo Varadkar. This left behind a relatively large gap that would need some follow up good news to keep from prices to start closing that gap. The I-fund was pushed into positive territory for the month of October with the 2.31% jump this week.
AGG (Bonds / F-fund) began to mimic the action of early September this week as investors began to see promise in the future of the economy. The index gapped down Friday on news of progress in the trade negotiations. The 50-day EMA is a considerable point of support and already showed to hold in September when the 20-day EMA could not. The F-fund fell 1.04% this week to fall 0.27% for the week.
Good luck and thanks for reading. We will be back here next week with another TSP Wrap Up. You can read our daily market commentary at the Market Comments page. If you need more help deciding what to do with your account, perhaps one of our Premium Services can help.
Thomas A Crowley
www.tsptalk.com
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It’s always so useful to see the TSP wrap up! Thanks for sharing!