7/30/12
Stocks rallied sharply on Friday narrowly missing making it two consecutive 200+ point gains for the Dow to end the week. The Dow gained 188 and all of the major indices picked up about 2% on the day.
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[TR]
[TD]
[TD="align: center"] Daily TSP Funds Return
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[TR]
[TD="align: right"] G-Fund:
[/TD]
[TD] +0.004%
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[TR]
[TD="align: right"] F-fund:
[/TD]
[TD] - 0.43%
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[TR]
[TD="align: right"] C-fund:
[/TD]
[TD] +1.91%
[/TD]
[/TR]
[TR]
[TD="align: right"] S-fund:
[/TD]
[TD] +2.18%
[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:
[/TD]
[TD] +1.84%
[/TD]
[/TR]
[TR]
[TD="colspan: 2, align: right"]
[/TD]
[/TR]
[/TABLE]
[/TD]
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In just two day, the S&P 500 moved from the bottom of its rising trading range, right up to the top, and there is some resistance just above at 1400. This will be a good test for the market as July wraps up and we head into a normally less friendly month for stocks.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The MACD indicators continues to show a big negative divergence which is a warning flag.
One of our market leaders - the Nasdaq, completely filled its open gap on Friday so with that out of the way, the support and resistance lines will be the areas to watch. Current support is rising but resistance is declining and is about to get tested.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The main market leader, the Dow Transportation Index, has been lagging after breaking down from its triangle formation last Monday, but it has since climbed back and is testing the old support, which could now act as resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The end of July tends to do pretty well historically, but August has been a weak month and it is the only month with a negative average return for the first few days of trading.
Chart provided courtesy of www.sentimentrader.com
From 1950 to 2011 August has an 0% average return with the month being positive just slightly more often than negative. Only September is worse, and it is about the same as February.
Chart provided courtesy of www.sentimentrader.com
But before you go selling everything based on seasonality, take a look at this chart.
During election years, August has the best average return going back to 1928. Hmmm.
To throw one more wrench in there, I wonder how many of those election year Augusts saw an economy with a disappointing 1.5% GDP?
Bonds were down sharply on Friday, fading the stock market rally as bond yields moved higher. We saw the yield on the 10-Year Treasury Note break above the 20-day EMA and nearly hit the 50-day EMA.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
For as long as this yield has been in a downtrend, it would be surprising to see it break above the 50-day EMA on its first try so, since yields move opposite to bond prices, I'd look for a little bounce back in the F-fund sometime this week as the 10-year yield could look to fill that open gap between 1.4% and 1.5%.
On Friday we will get the July jobs report. Estimates are looking for a gain of 105,000 jobs and an unemployment rate of 8.2%.
Thanks for reading! We'll see you here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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