10/26/11
Stocks moved down sharply yesterday as the volatility continues. We are seeing big moves both up and down, mostly up lately, as investors jockey for position in front of Europe's big debt fiasco resolution meetings. The Dow lost 204-points.
For the TSP, the C-fund was down 2.20% yesterday, the S-fund lost 2.60%, the I-fund dropped 1.15%, and the F-fund (bonds) gained 0.52%.
The European leaders finance minister meeting scheduled for today was cancelled and that sent shock waves through the world markets. Europe is still a mess despite the recent optimism, but it is not overly optimistic that we are at the mercy of overseas bureaucrats and politicians right now.
The S&P 500 fell below the 200-day EMA, while at the same time the 20-day EMA is crossing above the 50-day EMA. As I've mentioned before, the 20 moving above the 50 EMA, especially in a bear market, is usually a sign of being overbought. There is resistance above and the rising wedge is getting more narrow, so any continued upside action will defy the technical odds. In a strong market, it certainly can happen so the test continues.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Consumer confidence came in at levels not seen since the bear market lows of early 2009, but when we start seeing pessimism this high from consumers, it is a pretty good indication that we are closer to a bottom than a top.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
According to Jason at sentimenTrader.com:
"The Conference Board's preliminary survey of consumer confidence came out today with a horribly low number, one of the worst in the survey's 40+ year history.
"This is long-term stuff, but still - one year after readings at or below 50%, the S&P was positive 100% of the time (18 occurrences). By the time consumers are this depressed, a recession is usually priced in. Yes, yes, I know...this time is probably different.
"Anyway, its average return was +22.9%, with a maximum decline during the year of -4.1% on average, compared to a maximum gain of +25.6%."
Next week we get the October jobs report plus the Fed gets together for another FOMC meeting, so I don't expect things to slow down volatility-wise any time soon.
I see short-term uneasiness and long-term bullish signs.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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