06/14/13
Stocks opened in negative territory on Thursday but headed up almost immediately and never looked back as the Dow gained 180-points by the close.
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[TD="align: center"] Daily TSP Funds Return[TABLE="width: 149"]
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[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] +0.0050%[/TD]
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[TD="align: right"] +0.26%[/TD]
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[TD="align: right"] C-fund:[/TD]
[TD="align: right"] +1.49%[/TD]
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[TD="align: right"] S-fund:[/TD]
[TD="align: right"] +1.74%[/TD]
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[TD="align: right"] I-fund:[/TD]
[TD="align: right"] +1.27%[/TD]
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I'll be honest and tell you that I was out of the office almost the entire day yesterday and did not really see the rally play out. I only saw the final results and I was a little shocked by the strength, but when I looked at the 1987 chart, which we talked about on Thursday, it made more sense. I'll get to that in a second.
The S&P 500 is at some short-term resistance again. It's a bit higher than the prior resistance, but connecting the recent peaks we can see that this level may produce some trouble. But again, the 1987 chart might suggest there is more upside left.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
It will never match exactly of course, but comparing the current S&P chart with that of the 1987 chart you can see that yesterday's 1.5% day came at a similar point in '87 when the S&P gained 2.9%. I don't know if I can explain this as clearly as the two charts below can tell the story. The top chart being 2013 and the lower 1987...
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Taking a longer-term look at 1987 and you see where that 2.9% day came - it was September 22, 1987, and there was actually another week or so of upside action before the market made its swan dive.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
What happens next week that might cause a stir in the market like this? Well, you never know for sure, but we do know Japan's market has been plummeting lately - dropping over 20% from its recent peak. A little crash there could carry over to U.S. markets.
But even more interesting is next week's FOMC meeting and press conference from Ben Bernanke. Ben has a habit of propping up the markets when he talks, but then we see some some time afterwards.
I have no idea what will happen but this, and the Hindenburg Omen signal are enough for me to want to play it safe for a little while.
By the way, that crash in '87 saw a one-day drop of about 24%, and that was after a very week 2-week period before the crash. I hope after this I am called the boy who cried wolf because if it does happen, a lot of folks are going to see some major damage to their accounts. It may be irresponsible to scare our readings like this, but as I mentioned yesterday, what's the worse that can happen to us if we don't get a crash?
Thanks for reading! Have a great weekend!
Tom Crowley
Posted daily at TSP Talk Market Commentary
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