08/16/13
Stocks sank yesterday as the Dow shed 225-points, recording its second triple digit loss in a row for a total of 339-points. Bonds did not escape unscathed as the F-fund dropped 0.26%.
[TABLE="align: center"]
[TR]
[TD]
[TD="align: center"]
Daily TSP Funds Return[TABLE="width: 154"]
[TR]
[TD="align: right"] G-Fund:
[/TD]
[TD="align: right"] +0.0056%
[/TD]
[/TR]
[TR]
[TD="align: right"] F-fund:
[/TD]
[TD="align: right"] -0.26%
[/TD]
[/TR]
[TR]
[TD="align: right"] C-fund:
[/TD]
[TD="align: right"] -1.41%
[/TD]
[/TR]
[TR]
[TD="align: right"] S-fund:
[/TD]
[TD="align: right"] -1.69%
[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:
[/TD]
[TD="align: right"] -1.12%
[/TD]
[/TR]
[/TABLE]
[TABLE="align: center"]
[TR]
[TD="align: right"]
[/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The I-fund (-1.12%) was helped some by a sharp drop in the dollar.
The S&P 500 gapped down below recent support and fell to its 50-day EMA. Open gaps on the S&P 500 are rare so I would expect the gap shown below to get filled sooner rather than later, but whether that means the pullback is over, I don't know.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Hindenburg Omens have warned us that something like this could happen, but so far the damage has been limited. A correction, or a crash would be severe compared to what we've seen.
The Nasdaq 100 (QQQ) also gapped lower and I have never taken my eye off of that open gap from mid-July down below 74 on the QQQ. I would be surprised if that does not get filled, but the gap above may get filled first on any kind of snap back rally. That is if the Hindenburg Omen doesn't lead to the are crash first.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transportation actually had a nice comeback from larger earlier losses to lose less than 1% on Thursday. And the reversal came on high volume, which is always good to see on reversal days. Now, will this reversal mean just a quick fill of the open gap near the 50-day EMA resistance, or will we see this index, which has been hit hard this month, rebound back toward the recent highs?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
As I mentioned yesterday, the week after options expiration week saw the Transports reverse direction during the week after options expiration, so if that happens we could see a rebound next week.
Not surprisingly, sentiment was very bearish in our Sentiment Survey this week with bulls (30%) being outnumbered by the bears (61%) by more than 2 to 1. Extreme bearishness can help keep things from getting too bad, so the bulls will be counting on that.
The overbought/ oversold indicators are nearing extremely oversold.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Bonds made lower lows yesterday as it seems little escaped the losses. Bond yields, which move counter to bond prices, are starting to hit levels that could be dangerous for stocks.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
There are many things pointing to a possible short-term rebound but this is becoming a dangerous situation and it may be better to play it safe. Of course every time we have said something like this in 2013, it has turned out to be a great buying opportunity. What about this time?
Thanks for reading! Have a great 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.
