Stocks opened slightly lower on Monday, and treaded water for a couple of hours before the bottom started to fall out of the indices. This decline comes as we are heading into earnings season, where we are seeing a lot of negative pre-announcements. The Dow lost 179-points and all of the TSP stock funds are back in the red for the year. Bonds rallied.
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The S&P 500 (SPY) fell through the 20-day EMA and other than a new lower low in 2014, there hasn't been too much technical damage done to the chart yet. It was the most heavily traded day of the year, which may be a concern, and the next test for the SPY would be the rising support line.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Should that support from the bottom of the rising trading channel fail, then the dreaded 1929 chart comparison remains a possibility. The chances of a crash are remote, but still, this formation is called a "Three peaks and a Domed House" and they are bearish and can lead to significant declines after peaking. Today is January 14, which by comparison would have been the top in 1929, but the Dow actually peaked for us on December 31.
Chart provided courtesy of www.mcoscillator.com, analysis by TSP Talk
A little follow-up: Before the jobs report last week, I was suggesting that the report could help close the gap on the chart of the dollar ETF, UUP. Since then the UUP has moved lower although there is a good portion of the gap still open. And, although not as large, the drop last Friday opened a small gap on the upside.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I also noted that because the I-fund benefits from weakness in the dollar, the open gap above on the EFA chart could get filled should the dollar fill its gap. That nearly happened prior to yesterday's sell-off, and it is officially still open, but Friday's rally may have "unofficially" filled it.
Bond yields fell again yesterday, and falling bond yields are in general caused by signs of weakness in the economy as lower interest rates make it easier to borrow, and thus spend. Clearly the uptrend in bond yields broke after the weak jobs report last week, and the decline continued on Monday.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The price of bonds and the F-fund benefit from this action as investors look for alternative places to put assets when stocks fall, but there's more to it...
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bond market sentiment had reached multi-year bearishness in 2013 and that continues into 2014. Contrarian investors would look at this as a sign of a bottom since we must be running out of people who are still selling bonds.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
A rally in bonds, which may or may not come in conjunction with more selling in stocks, could be short-lived or may last a while, but you can see by the chart above that sentiment can change quickly once there is a rally. With the breakout from the recent downtrend, it is possible that a new rising trend may have started in bonds, so we'll see if investors do jump on a rally and send sentiment up toward the overly bullish line at some point. When sentiment is this bearish the rallies can be explosive because the old bond bears are so plentiful that there could be a stampede to buy.
Read more in today's TSP Talk Plus Report. We post more charts and indicators, plus discuss the Sentiment Survey Results and its System. 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
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.
[TABLE="width: 79%, align: center"]
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[TD="align: center"]Daily TSP Funds Return
[TR]
[TD="align: right"]More returns [/TD]
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[/TABLE]
[/TD]
[/TR]
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The S&P 500 (SPY) fell through the 20-day EMA and other than a new lower low in 2014, there hasn't been too much technical damage done to the chart yet. It was the most heavily traded day of the year, which may be a concern, and the next test for the SPY would be the rising support line.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Should that support from the bottom of the rising trading channel fail, then the dreaded 1929 chart comparison remains a possibility. The chances of a crash are remote, but still, this formation is called a "Three peaks and a Domed House" and they are bearish and can lead to significant declines after peaking. Today is January 14, which by comparison would have been the top in 1929, but the Dow actually peaked for us on December 31.
Chart provided courtesy of www.mcoscillator.com, analysis by TSP Talk
A little follow-up: Before the jobs report last week, I was suggesting that the report could help close the gap on the chart of the dollar ETF, UUP. Since then the UUP has moved lower although there is a good portion of the gap still open. And, although not as large, the drop last Friday opened a small gap on the upside.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I also noted that because the I-fund benefits from weakness in the dollar, the open gap above on the EFA chart could get filled should the dollar fill its gap. That nearly happened prior to yesterday's sell-off, and it is officially still open, but Friday's rally may have "unofficially" filled it.
Bond yields fell again yesterday, and falling bond yields are in general caused by signs of weakness in the economy as lower interest rates make it easier to borrow, and thus spend. Clearly the uptrend in bond yields broke after the weak jobs report last week, and the decline continued on Monday.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The price of bonds and the F-fund benefit from this action as investors look for alternative places to put assets when stocks fall, but there's more to it...
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bond market sentiment had reached multi-year bearishness in 2013 and that continues into 2014. Contrarian investors would look at this as a sign of a bottom since we must be running out of people who are still selling bonds.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
A rally in bonds, which may or may not come in conjunction with more selling in stocks, could be short-lived or may last a while, but you can see by the chart above that sentiment can change quickly once there is a rally. With the breakout from the recent downtrend, it is possible that a new rising trend may have started in bonds, so we'll see if investors do jump on a rally and send sentiment up toward the overly bullish line at some point. When sentiment is this bearish the rallies can be explosive because the old bond bears are so plentiful that there could be a stampede to buy.
Read more in today's TSP Talk Plus Report. We post more charts and indicators, plus discuss the Sentiment Survey Results and its System. 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
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.
