After losing 115-points on Friday, the Dow fell another 223-points on Monday, and most of that came in the last hour of trading. For the first time in a long time, we're seeing a little panic out there, and it seems to be a bit of a shock to some of the newer investors. Yes, markets do go down sharply at times, but they also come back with a vengeance once they rebound.
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The above share prices are from Friday since the TSP did not post share prices for Monday's holiday.
With no share prices for Monday, those in the stock funds may have delayed some pain for a day, unless Tuesday becomes a Turnaround Tuesday and then maybe we'll be spared some of that pain. And yes, it is painful, but how much it will take each of us to say "uncle" varies. I have seen signs of capitulation out there - the "I give ups."
The SPY (S&P 500 / C-fund) fell through the 200-day EMA like a hot knife through butter. That shows a little panic out there; A "get me out at any cost" mentality, which usually precedes a pretty strong relief rally. We may end up in a bear market, too soon to say, but the market won't go straight down. There will be sharp rallies in there, just to keep you guessing.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
This chart shows that the PMO indicator is lower than its been all year. This hasn't exactly been a bearish year for stocks so the comparison may not be a good one, but the sell-off in January had a similar impact of investor sentiment.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
In this chart I marked the spots (blue arrows) where the 20-day EMA came down to touch (or cross, or nearly touch) the 50-day EMA. The crosses tend to come when the market is oversold and due for a rebound. Again, this is comparing action from a bull market. A bear market may not have as favorable results, but oversold rebounds happen in all types of markets.
Chart provided courtesy of www.stockcharts.comm, analysis by TSP Talk
The red arrows above shows that the market tends to reverse direction (up or down) when volume spikes to where it was the last couple of days, or above. The 200-day EMA would be a convenient place for a positive reversal.
The Wilshire 4500 (S-fund) has been getting pummeled and waterfall-like declines have us thinking we'll never see an up day again. Of course that isn't so, unless the world is coming to an end, in which case you probably won't need those stocks. I don't mean to make light of it, but I am trying to lighten the mood for those feeling panicky.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
We will get a relief rally. The only question is what happens after the rally? Another leg down, or is this a bottom?
The AGG (bonds / F-fund) continues to benefit from the sell-off in stocks. That the fundemental story here.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading! We'' see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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