The Dow dropped another 335-points yesterday as the wild swings continue. Although the S&P 500 remained above recent lows intraday, it did make a new 2-month closing low. 2% losses were racked up in the stock indices, and bonds were flat.
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The action can be unnerving for anyone in the stock funds. Those in cash are probably sleeping better, but wondering when it will be a good time to get back in stocks. No one knows the answer. A little gambling can hurt you, or make you a hero. Let your tolerance for risk be your guide.
After a huge day on Wednesday, the SPY (S&P 500 / S-fund) saw its lowest closing price since August. Closing prices matter since our TSP transactions are based on the closing price, but the fact that last Thursday's low, and big positive reversal day, has held twice now, is a positive for now. At this point it is either going to hold and rebound, or possibly trigger a little panic sell-off. We don't know. The indicators would suggest we are due for a rally, but panic selling can take the market down lower than what seems reasonable.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Volume spiked up over the last couple of days, and that is what you wanted to see on Wednesday's positive reversal day, but not necessarily on a solid down day like Thursday. But a spike in volume could mean there's a little panic out there, and that usually is a good time to be in stocks. Sure, things can get worse, but panic selling usually gets you whipsawed at just the wrong time.
In this longer-term chart I marked prior lows where we saw a similar stall, and a couple of them had a 3-day low test before rallying. The one in January failed and broke down sharply, but that breakdown day did mark the closing low. There's no doubt that the current action is much more volatile with the wild swings, so we might not get as clean of a recovery.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
I showed this chart the other day after Tuesday's sell-off to remind us that the S&P 500 is currently testing some long-term support.
Chart provided courtesy of www.stockcharts.comm, analysis by TSP Talk
And also flirting with the 100-day EMA that, except for some brief breaks, has held up for nearly two years.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) is clearly in trouble having made a new closing low and hitting levels not seen since February.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Russell 2000 (small caps) managed to hold above Wednesday's low, but it did make a new multi-month closing low. All of these charts are getting ugly, but are getting due for an oversold relief rally.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (bonds / F-fund) was down although the F-fund was basically flat. It has now closed above the breakout point for three straight days, which is bullish for bonds, but how low can yields go? It seems like it is just a temporary safe haven while stocks are fluctuating.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Monday is a federal holiday and the TSP will be closed so we won't be posting any updated commentary until Tuesday. The stock market will be open, however.
Per www.tsp.gov: Some financial markets will be closed on Monday, October 13th in observance of the Columbus Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (October 13th) will be processed Tuesday night (October 14th), at Tuesday's closing share prices.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the Sentiment Survey Results and its 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 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.
