We saw a nice snap-back rally on Thursday as the Dow gained 228-points. The reversal higher off the morning lows was impressive, but the close was a little suspect as the Dow slipped 103-points off the highs in the final minutes of trading. The bulls and bears may battle it out for a few more days before we get any real direction, but nervous bulls may give the bears an edge on Friday as we head into a 3-day weekend.
From tsp.gov: "Some financial markets will be closed on Monday, January 18th in observance of the Martin Luther King, Jr. holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (January 18th) will be processed Tuesday night (January 19th), at Tuesday's closing share prices."
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The back and forth action could be a good sign since it may indicate that a reversal is coming, but it can go on for days until the bulls or the bears win out - meaning there's a chance that Thursday's gains will be wiped out, even if we are forming a low. Heading into a long weekend on an options expiration day, there could be some nerves out there on Friday.
For what it is worth, today is the 10th trading day of the month, but clearly we haven't been following the lead of this seasonality chart so far this year.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The SPY (S&P 500 / C-Fund) grabbed back a chunk of Wednesday's losses but not all of them. This SPY chart doesn't show the main story so let's look at the chart of the actual S&P 500 Index below this one...
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The S&P 500 Index is actually down testing the August and September lows. It could still take a few days to settle, but it's possible that the brief breakdown below the support line, and yesterday's reversal, is triggering a low. The market doesn't usually make it that easy for us so we'll see.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Before we get too excited, let's remember that we had been in a bull market for many years now so we're not very unaccustomed to actual bear market activity, and the jury may be out on whether that is the case, depending who you ask. When we move into outright bear markets the charts an indicators take on a totally different attitude. We flirted with a bear market in August and we're at that point again.
This chart shows the 10-month moving average on a monthly chart. The S&P 500 is now trading below the 10-month EMA and in the past that has meant hunkering down for a long bear market. There were a few false alarms, like the one we had this past summer, but we're here again and we have to figure out if this is another false alarm or if the market will act like prior red arrow breakdowns.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (small caps / S-Fund) hit the descending support line and rebounded. It's just like the support on the S&P 500 chart above, but since small caps have been making lower lows, it's a descending line instead of ascending. The reversal and kangaroo tail was fairly prominent on this chart. Sure we can get a decent rally, but this would be a bear market rally since, unlike the S&P, small caps have been in a bear market for many months.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The price of oil rallied 2% on Thursday and the stock market applauded the move. The question is, are we seeing a low or just another bear flag forming?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Chinese Shanghai Index successfully tested the August lows, at least so far it has been a success. Like our markets, this index has gone virtually straight down since Christmas and due for some relief, but that won't give us an answer on whether this is a low or not. That will take some time.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-Fund) was up slightly and closed above the flag again. Interesting. That's 2 closes. We like to see at least 3 closes before confirming a breakout.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. 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
Thanks for reading. Have a great holiday weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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.
From tsp.gov: "Some financial markets will be closed on Monday, January 18th in observance of the Martin Luther King, Jr. holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (January 18th) will be processed Tuesday night (January 19th), at Tuesday's closing share prices."
[TABLE="width: 89%, align: center"]
[TR]
[TD="width: 180, align: center"]
[TD="width: 49, align: center"][/TD]
[TD="align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The back and forth action could be a good sign since it may indicate that a reversal is coming, but it can go on for days until the bulls or the bears win out - meaning there's a chance that Thursday's gains will be wiped out, even if we are forming a low. Heading into a long weekend on an options expiration day, there could be some nerves out there on Friday.
For what it is worth, today is the 10th trading day of the month, but clearly we haven't been following the lead of this seasonality chart so far this year.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The SPY (S&P 500 / C-Fund) grabbed back a chunk of Wednesday's losses but not all of them. This SPY chart doesn't show the main story so let's look at the chart of the actual S&P 500 Index below this one...
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The S&P 500 Index is actually down testing the August and September lows. It could still take a few days to settle, but it's possible that the brief breakdown below the support line, and yesterday's reversal, is triggering a low. The market doesn't usually make it that easy for us so we'll see.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Before we get too excited, let's remember that we had been in a bull market for many years now so we're not very unaccustomed to actual bear market activity, and the jury may be out on whether that is the case, depending who you ask. When we move into outright bear markets the charts an indicators take on a totally different attitude. We flirted with a bear market in August and we're at that point again.
This chart shows the 10-month moving average on a monthly chart. The S&P 500 is now trading below the 10-month EMA and in the past that has meant hunkering down for a long bear market. There were a few false alarms, like the one we had this past summer, but we're here again and we have to figure out if this is another false alarm or if the market will act like prior red arrow breakdowns.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (small caps / S-Fund) hit the descending support line and rebounded. It's just like the support on the S&P 500 chart above, but since small caps have been making lower lows, it's a descending line instead of ascending. The reversal and kangaroo tail was fairly prominent on this chart. Sure we can get a decent rally, but this would be a bear market rally since, unlike the S&P, small caps have been in a bear market for many months.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The price of oil rallied 2% on Thursday and the stock market applauded the move. The question is, are we seeing a low or just another bear flag forming?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Chinese Shanghai Index successfully tested the August lows, at least so far it has been a success. Like our markets, this index has gone virtually straight down since Christmas and due for some relief, but that won't give us an answer on whether this is a low or not. That will take some time.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-Fund) was up slightly and closed above the flag again. Interesting. That's 2 closes. We like to see at least 3 closes before confirming a breakout.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. 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
Thanks for reading. Have a great holiday weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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.
