2/22/13
Stocks dropped again yesterday as investors were still trying to digest Wednesday's news from the Fed that possibly puts quantitative easing in jeopardy. The Dow fell 47-points but like Wednesday, the broader indices saw some stiffer losses.
[TABLE="width: 88%, align: center"]
[TR]
[TD]
[/TD]
[TD="align: center"]Daily TSP Funds Return[TABLE="width: 159"]
[TR]
[TD]G-Fund:[/TD]
[TD="align: right"]+0.0043%[/TD]
[/TR]
[TR]
[TD]F-fund:[/TD]
[TD="align: right"]+0.12%[/TD]
[/TR]
[TR]
[TD]C-fund:[/TD]
[TD="align: right"]-0.61%[/TD]
[/TR]
[TR]
[TD]S-fund:[/TD]
[TD="align: right"]-1.01%[/TD]
[/TR]
[TR]
[TD]I-fund:[/TD]
[TD="align: right"]-1.30%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 80%, align: center"]
[TR]
[TD="align: right"]More returns[/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
With one Interfund Transfer (IFT) still available in February, I took a possible reckless gamble to buy the second down day in a bull market. Even if a top is forming, it's less common to see a strong market stop on a dime and go straight down. A more common outcome would be another attempt by the bulls to make new highs, and how that turns out may tell us more about the magnitude of any pullback we may get. If I'm wrong, I'll use my free move to the G-fund.
The S&P 500 fell below the first layer of support on Wednesday and yesterday it took out the 20-day EMA.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The longer-term trading channel remains intact and obviously we are closer to the top of the range than the bottom, so while I am back in the stock funds as of today, I think the market could see a more significant correction in the near future. I'm just trying to catch a little bounce.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The 20-day EMA was broken on Thursday, but that is the first time that has happened this year. We've talked about other years that started with relentless rallies, and the two we've mentioned most often, 1987 and 2012, both saw a snap-back rally after the first break of the 20-day EMA.
1987...
Chart provided courtesy of www.decisionpoint.com
2012...
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq also broke below its first level of support, but yesterday's decline found support at the 50-day EMA, and the longer-term rising support line.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
There is still an open gap created on January 2nd, but that could takes months to fill. I could be wrong, but I don't think this current pullback is going to do that kind of damage.
The larger overview of the chart of the dollar is quite bearish with a head and shoulders within head another shoulders pattern. But it has been rallying strongly this month, mostly because of the weak economic data out of Europe recently, and that is putting pressure on stocks. The rally in the dollar is now up against some resistance which is the top of a parallel trading channel so here's a little test today.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The yield on the 20-year T-note is back down to the rising support line. This rend has held over and over since it began in late November.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Like many charts, this can go either way, but the assumption is that the trend will continue. If yields move up, stocks could get their bounce (and bond prices and the F-fund would go down.) If this trading channel breaks, perhaps the stock market rally will end as well.
I'm looking for at least a short-term bounce but I won't be very patient. Continued weakness and breaks in the upside trends would be a change in what we have been seeing and we'd have to start thinking much more defensively.
The Sentiment Survey came it at 29% bullish, 63% bearish for a 0.43 to 1 bulls to bears ratio. Last time we saw a ratio that the low, the S&P rallied 1.73% the following week.
Thanks for reading! Have a great weekend!
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.
Stocks dropped again yesterday as investors were still trying to digest Wednesday's news from the Fed that possibly puts quantitative easing in jeopardy. The Dow fell 47-points but like Wednesday, the broader indices saw some stiffer losses.
[TABLE="width: 88%, align: center"]
[TR]
[TD]
[TD="align: center"]Daily TSP Funds Return[TABLE="width: 159"]
[TR]
[TD]G-Fund:[/TD]
[TD="align: right"]+0.0043%[/TD]
[/TR]
[TR]
[TD]F-fund:[/TD]
[TD="align: right"]+0.12%[/TD]
[/TR]
[TR]
[TD]C-fund:[/TD]
[TD="align: right"]-0.61%[/TD]
[/TR]
[TR]
[TD]S-fund:[/TD]
[TD="align: right"]-1.01%[/TD]
[/TR]
[TR]
[TD]I-fund:[/TD]
[TD="align: right"]-1.30%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 80%, align: center"]
[TR]
[TD="align: right"]More returns[/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
With one Interfund Transfer (IFT) still available in February, I took a possible reckless gamble to buy the second down day in a bull market. Even if a top is forming, it's less common to see a strong market stop on a dime and go straight down. A more common outcome would be another attempt by the bulls to make new highs, and how that turns out may tell us more about the magnitude of any pullback we may get. If I'm wrong, I'll use my free move to the G-fund.
The S&P 500 fell below the first layer of support on Wednesday and yesterday it took out the 20-day EMA.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The longer-term trading channel remains intact and obviously we are closer to the top of the range than the bottom, so while I am back in the stock funds as of today, I think the market could see a more significant correction in the near future. I'm just trying to catch a little bounce.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The 20-day EMA was broken on Thursday, but that is the first time that has happened this year. We've talked about other years that started with relentless rallies, and the two we've mentioned most often, 1987 and 2012, both saw a snap-back rally after the first break of the 20-day EMA.
1987...
Chart provided courtesy of www.decisionpoint.com
2012...
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq also broke below its first level of support, but yesterday's decline found support at the 50-day EMA, and the longer-term rising support line.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
There is still an open gap created on January 2nd, but that could takes months to fill. I could be wrong, but I don't think this current pullback is going to do that kind of damage.
The larger overview of the chart of the dollar is quite bearish with a head and shoulders within head another shoulders pattern. But it has been rallying strongly this month, mostly because of the weak economic data out of Europe recently, and that is putting pressure on stocks. The rally in the dollar is now up against some resistance which is the top of a parallel trading channel so here's a little test today.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The yield on the 20-year T-note is back down to the rising support line. This rend has held over and over since it began in late November.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Like many charts, this can go either way, but the assumption is that the trend will continue. If yields move up, stocks could get their bounce (and bond prices and the F-fund would go down.) If this trading channel breaks, perhaps the stock market rally will end as well.
I'm looking for at least a short-term bounce but I won't be very patient. Continued weakness and breaks in the upside trends would be a change in what we have been seeing and we'd have to start thinking much more defensively.
The Sentiment Survey came it at 29% bullish, 63% bearish for a 0.43 to 1 bulls to bears ratio. Last time we saw a ratio that the low, the S&P rallied 1.73% the following week.
Thanks for reading! Have a great weekend!
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.
