5/10/12
Another day of wild swings in the stock market as the early 184-point loss in the Dow nearly moved into positive territory by the afternoon, but alas it could not sustain the upward momentum and the Dow closed down 97-points.
[TABLE="align: center"]
[TR]
[TD]
[TD="align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"] C-fund:
[/TD]
[TD] - 0.64%
[/TD]
[/TR]
[TR]
[TD="align: right"] S-fund:
[/TD]
[TD] - 0.45%
[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:
[/TD]
[TD] - 0.85%
[/TD]
[/TR]
[TR]
[TD="align: right"] F-fund:
[/TD]
[TD] - 0.08%
[/TD]
[/TR]
[TR]
[TD="align: right"] G-Fund:
[/TD]
[TD] +0.004%
[/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The S&P 500 did not follow-through on Tuesday's reversal day, but instead made a lower low and closed down 0.7%. The chart looks to have created a head and shoulders pattern (H&S). An H&S is a continuation pattern, but with this one having tested the head already and pulling back down, it does not look overly bullish for the intermediate-term, although the short-term is probably due for a bounce.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
You may remember this H&S chart where the test of the middle of the head is one of the common outcomes before a breakdown. With the ascending angle of this H&S, it may have already broken down below the neckline so well have to see if any bounce can get back over it. If not, it could be trouble.
The Nasdaq came down to test the prior lows again and that 2900 area held again. A slightly good sign, but the more often it knocks on that door, the more likely someone is going to let it in.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow has now closed down for 6 consecutive days. Our friends at sentimenTrader.com is on top of this as they found something quite rare occurring. They said that this is only the 19th time since 1900 that the Dow has been down 6 straight days while it is still 5% above the 200-day moving average. You can see in the chart below that the short to longer-term had a pretty good record going forward.
"The last one was in 2006, and that was the only other one in the past 20 years. In the very short-term, the Dow's most consistent performance was 3 days later, when it was positive 79% of the time with an average of +1.0%."
Chart provided courtesy of www.sentimentrader.com
"Even more impressive, its average drawdown (worst loss) during the next month was -0.6% compared to a maximum gain that averaged +5.5%. It lost more than -4% during its worst point over the next month only 1 time; it gained more than +4% at its best point 12 times."
They mentioned that if it declined for a 7th straight day, buying that day's close and holding for 3 days resulted in 8 winning trades out of 8 occurrences, averaging +1.9%.
One last time on the adage, "Sell in May and go away":
I found this chart at www.investech.com. Basically it compares two investors who start with a $10,000 account back in 1960.
One (A) buys on November 1st and sells at the end of April.
The other (B) does the opposite - buys at the end of April and sells at the end of October.
Of course it does not work every year and many of us are "what have you done for me lately" analysts, but over the long haul there was a huge difference in returns.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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