Stocks recovered a bit on Friday from Thursday's sell-off as the Dow picked up 28-points, which was somewhere between the high and low of the day. The S&P 500 and bonds finished slightly in the red, while small caps and the I-fund picked up modest gains.
[TABLE="width: 80%, align: center"]
[TR]
[TD="width: 300"]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 179"]
[TR]
[TD="width: 83, align: right"] G-Fund:[/TD]
[TD="align: right"] +0.0063%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] F-fund:[/TD]
[TD="align: right"] -0.02%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] C-fund:[/TD]
[TD="align: right"] -0.03%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] S-fund:[/TD]
[TD="align: right"] +0.32%[/TD]
[/TR]
[TR]
[TD="width: 83, align: right"] I-fund:[/TD]
[TD="align: right"] +0.19%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 69%, align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The losses on Thursday were not severe to say the least. Most indices were down less than 1% on the day, yet we saw a sharp rise in bearishness on a few sentiment surveys. The TSP Talk Sentiment Survey saw the bears rise from 19% to 40% in one week, while the bulls fell from 71% to 52%. Does this mean investors are still not believers in the market rally, and perhaps they were just bullish for the positive holiday seasonal bias?
The S&P 500 (SPY) chart starts in the bottom left hand corner, and makes its way to the top right. Looks like a bull market. But it is extended and at the top of some rising trading channels, which means there could be room to pullback.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The small caps remain in their rising trading channel but they backed off since testing the top of that channel. Again, bullish action but potentially extended. That black support line isn't as strong as the bottom of the red channel, but it did hold three times before breaking in early December.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I have updated this chart from mcoscillator.com again to show you where we are in the 1929 comparison.
Chart provided courtesy of www.mcoscillator.com, analysis by TSP Talk
I look at a chart like this in a couple of ways. First off, these comparisons rarely turn out the same way as the original pattern. We watch them for a bit of entertainment purposes. I don't want to take it too seriously and have everyone sell everything they own because of a 80-year old pattern, but I also don't want to ignore it either... just in case. If I knew of this and didn't tell you so you use your own judgment, I wouldn't be doing my job. I try not to make it my job to tell you what to do, but rather to give you information so you can make your own, hopefully better- informed, decisions. What you do with a chart like this is a personal decision. If you are 25 you may do one thing, where a 55 year old might do something completely different.
Bond charts look bad but they tried to rebound a bit in the last couple of days. I think the story will be whether these two charts can recapture the support they broke below in December.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The yield on the 10-year treasury is still flirting with 3%. The support from the rising trading channel has been quite strong, but the range is getting a little more narrow, although it's not quite a wedge.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I believe in the next week or so we'll know what kind of a year 2014 is going to be since January is a good barometer for the rest of the year. So far the one-day pullback is meaningless, but it is a bad start for that important barometer.
Read more in today's TSP Talk Plus Report. We post more charts and indicators, plus discuss the Sentiment Survey and its System. 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! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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