Follow-through

10/17/12

Stocks rallied sharply on Tuesday, following through on Monday's bounce off of the 50-day EMA of the S&P 500 and the Dow charts. The Dow gained 128-points on the day.
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[/TD]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 152"]
[TR]
[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] 0.0036%[/TD]
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[TD="align: right"] F-fund:[/TD]
[TD="align: right"] -0.14%[/TD]
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[TD="align: right"] C-fund:[/TD]
[TD="align: right"] 1.03%[/TD]
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[TD="align: right"] S-fund:[/TD]
[TD="align: right"] 0.97%[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:[/TD]
[TD="align: right"] 1.08%[/TD]
[/TR]
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More returns​

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The S&P 500 is back above the 20-day EMA and now, after the recent lower low, the test will be if it can take out the previous high and stop a potential new downtrend like we saw in the Nasdaq.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The Dow Transportation Index, after consolidating for about 6-days, convincingly broke above the 200-day EMA yesterday. There is no resistance until it gets above the 5200 area, and at that point we'll start the test of the top of large trading channel all over again.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The small caps may have broken out of a falling wedge pattern, which would be bullish, but the 20-day EMA is now in the way. A convincing push above the 20-day EMA would put all of the major indices back above the 20-day EMA, and that would be a pretty bullish sign - at least for the short-term.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The yield on the 10-year Treasury Note hit the descending resistance line after bouncing off the rising support on Friday. The yield will have to pick a path out of this triangle formation.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

If the break is to the upside, bonds will be less favorable so the F-fund may not be the place to be. If this breaks down, bond prices and the F-fund will do better.

Why this market is rallying again, I don't know. Is it just QE3 at work? As we talked about before, there is a fiscal cliff looming, the country has a $16 Trillion debt, 23 million folks are out of work, gas prices are near $4 a gallon. That is why I look at the charts and indicators. The market may collapse one day, but the charts should give us some clues beforehand - hopefully with enough time for us to react. Right now they are looking favorable - at least in the short-term. That could change next week.

I spoke with some friends recently who were asking me what they should be doing with their money. I said, it depends what day you ask me. I am a big believer, thanks to RevShark, that buy and hold is the more dangerous approach to investing than timing, because you are completely at the mercy of the market using buy and hold. If the market drops 20%, your account goes down 20%. At least if you make some attempts to sidestep the drops while getting aggressive during more favorable period, you have a shot at avoiding big losses. Well, that's what I try to do anyway.

Thanks for reading! We'll see you back here tomorrow.

Tom Crowley


Posted daily at TSP Talk Market Commentary

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[dirtdawber]

Not to get too political here........aw heck I'll get political. My prediction (neck fully out): If Obama appears to be winning over the next several days and weeks and eventually wins, the market will do great. I predict the fiscal cliff will either be avoided in lame duck session or quickly resolved in the next Congress. That being the case, the markets will soar. If Romney appears to be winning and eventually wins, the market will start to erode and gather steam tracking downward and eventually collapse as it becomes clear that his tax plan is not workable and as the budget deficit grows (it's been shrinking over the last 3 1/2 years) and the debt balloons. There could be a moment of euphoria for a short period of time but it won't last long.

Businessmen do not make very good Presidents. Bush was kind of businessman (not very good at that either). The last President we had who was a good businessman was Hoover. He was GREAT project guy, overseeing war relief in Europe in WWI and WWII, Commerce Secretary, and Mississippi Flood Relief but didn't have the accumin to govern as President If Romney wins, think GOLD.

 

[FAAM]

"dirtdawber" is making very much sense in his comments; I appreciate his comments; I agree. The quasi-holding pattern of stock markets will break up or down with the vote, & "D" does not stand for Down.