08/02/11
It was a wild day on Wall Street yesterday as the emotional Monday morning traders jumped on the fact that a debt ceiling deal was a formality away from passing. The Dow opened 140-points higher but things went south very quickly.
From top to bottom, the Dow saw a 284-point swing between 9:30 AM ET and just before noon, but buyers stepped up into the very oversold market during afternoon trading.
For the TSP, the C-fund lost 0.41% yesterday, the S-fund fell 0.48%, the I-fund dropped 0.97%, and the F-fund (bonds) gained 0.27%.
The debt ceiling deal was a sigh of relief for investors but it was more poor economic data that seemed to take top billing and gave them a reason to sell the strong open.
The S&P 500 did make a lower low and a higher high compared to Friday's action, making it an "outside" day. Outside days can be signs of imminent reversals but it would have been a lot more convincing had the index closed near the highs. I'm not sure the action did much of anything except give an opportunity for some investors to buy an oversold condition, after others sold the early strength. Looking for a silver lining, the 200-day EMA did hold again.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The ISM Manufacturing Index came in well below estimates sending stocks reeling, and while Scribbler often talks about these less known economic indicators in his TSP & Economic Report, I don't usually mention them. That's mainly because I am more in tune with the charts telling the story, but if you look at the S&P 500 chart compared to the ISM report over the last couple of years, you can see how influential it can be.
Charts provided courtesy of www.decisionpoint.com / www.briefing.com, analysis by TSP Talk
The market seems to take its directional queue from the data.
As you may have seen, the House of Representatives passed the debt ceiling bill last night but the futures are not jumping for joy as they are up only modestly in overnight trading. The bill goes to the Senate today for a vote at noon ET, and while it is expected to pass and be signed by the president soon after, I am reminded again of the TARP bill passing in 2008 that did not give the market the boost many investors had expected.
We see support below in the S&P 500 at the 200-day EMA and the lower end of the current 6-month trading range. That, and the current extreme oversold readings, are the only real reasons I am giving this market any more time. I want to keep a sharp eye on any oversold rally because I am very interested to see how investors react: Are they still selling strength, or will a rally attract more money from the sidelines?
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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.
It was a wild day on Wall Street yesterday as the emotional Monday morning traders jumped on the fact that a debt ceiling deal was a formality away from passing. The Dow opened 140-points higher but things went south very quickly.
From top to bottom, the Dow saw a 284-point swing between 9:30 AM ET and just before noon, but buyers stepped up into the very oversold market during afternoon trading.
For the TSP, the C-fund lost 0.41% yesterday, the S-fund fell 0.48%, the I-fund dropped 0.97%, and the F-fund (bonds) gained 0.27%.
The debt ceiling deal was a sigh of relief for investors but it was more poor economic data that seemed to take top billing and gave them a reason to sell the strong open.
The S&P 500 did make a lower low and a higher high compared to Friday's action, making it an "outside" day. Outside days can be signs of imminent reversals but it would have been a lot more convincing had the index closed near the highs. I'm not sure the action did much of anything except give an opportunity for some investors to buy an oversold condition, after others sold the early strength. Looking for a silver lining, the 200-day EMA did hold again.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The ISM Manufacturing Index came in well below estimates sending stocks reeling, and while Scribbler often talks about these less known economic indicators in his TSP & Economic Report, I don't usually mention them. That's mainly because I am more in tune with the charts telling the story, but if you look at the S&P 500 chart compared to the ISM report over the last couple of years, you can see how influential it can be.
Charts provided courtesy of www.decisionpoint.com / www.briefing.com, analysis by TSP Talk
The market seems to take its directional queue from the data.
As you may have seen, the House of Representatives passed the debt ceiling bill last night but the futures are not jumping for joy as they are up only modestly in overnight trading. The bill goes to the Senate today for a vote at noon ET, and while it is expected to pass and be signed by the president soon after, I am reminded again of the TARP bill passing in 2008 that did not give the market the boost many investors had expected.
We see support below in the S&P 500 at the 200-day EMA and the lower end of the current 6-month trading range. That, and the current extreme oversold readings, are the only real reasons I am giving this market any more time. I want to keep a sharp eye on any oversold rally because I am very interested to see how investors react: Are they still selling strength, or will a rally attract more money from the sidelines?
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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.
