Stocks skyrocketed yesterday on the rumor of a temporary deal to delay the debt ceiling deadline. The buying was broad with almost every major U.S. index gaining over 2% on the day. The Dow gained 323-points.
[TABLE="width: 80%, align: center"]
[TR]
[TD="width: 310"]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 165"]
[TR]
[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] +0.0056%[/TD]
[/TR]
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[TD="align: right"] F-fund:[/TD]
[TD="align: right"] -0.05%[/TD]
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[TD="align: right"] C-fund:[/TD]
[TD="align: right"] +2.20%[/TD]
[/TR]
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[TD="align: right"] S-fund:[/TD]
[TD="align: right"] +2.38%[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:[/TD]
[TD="align: right"] +1.82%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 69%, align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
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The I-fund was only up 1.15% but the overseas markets will likely play catch up today.
Correction: The I-fund share price was changed on the TSP.gov website making the daily return for Thursday 10/10/13, +1.82%.
This rally was triggered by a rumor that a debt ceiling deal was being negotiated, but as of Thursday night at 9 PM ET, I haven't heard of any deal being official, although they are talking. Could this be a case of "buy the rumor - sell the news"? Possibly, and the charts may give us some clues. I'd prefer to let the charts tell us what going on rather than have the headlines move the market, and yesterday's rally was an example of that as no deal was made, but the charts seem to be telling us that we will see one.
The S&P 500 (SPY) rallied 2.2% breaking above the recent descending trading channel, and it recaptured the 20-day and 50-day EMA's.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Even better, the S&P 500 moved back above the long-term rising support line. As I have mentioned many times before, I like to give a breakout / breakdown 3 to 5 days to confirm the move. The S&P 500 had closed below that long-term support line for 2 days so this move back above it negates the breakdown. Sure, it could head back down below support, but as of right now, it is still in the uptrend.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow has lagged the broader indices basically moving in a sideways trading range since April. It hit the 200-day EMA on Wednesday and on Thursday it rebounded off that EMA as if it touched a hot stove. This could be too much to ask, but after nearly 6-month consolidation with a bounce off of the 200-day EMA similar to the one we saw in the beginning of this year, and perhaps the Dow is ready for another leg higher?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transportation Index moved back above its 20 and 50-day EMAs, but like the other indices, there is a new open gap below, and there is some descending resistance right here right now that the Trannies will have to deal with.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
Bond yields rallied during the stock market rally Thursday as investors seem to sell bonds in order to buy stocks. The bear flag on the 30-year yield broke to the upside, which is unusual and can often be a fake-out move.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The 10-year yield broke above its descending resistance line and the 20 and 50-day EMAs. This looks potentially bearish for bonds but I am skeptical and would lean toward this being a false move.
It was a great day for stocks but as we have been saying, no deal has been official yet and there is a chance this "buy the rumor" rally could be met with a "sell the news" sell-off. The key will be the charts with their support and resistance levels. As long as the S&P 500 remains above its long-term rising support line and the 50-day EMA, I will likely lean on the bullish side.
In today's TSP Talk Plus report we will look at a few more charts including the Nasdaq, the short-term indicators and the Sentiment Survey results. 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
Per TSP.gov: Some financial markets will be closed on Monday, October 14th in observance of the Columbus Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (October 14th) will be processed Tuesday night (October 15th), at Tuesday's closing share prices.
Thanks for reading! Have a great holiday weekend! We'll see you Tuesday.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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