08/01/11
Possible debt deal spells relief
The Dow lost 97-points on Friday capping a week that saw both the Dow and S&P 500 close down every day as the uncertainty of the debt negotiations lingered. Now we see the real possibility of a deal to raise the debt ceiling and the futures are pointing sharply higher (Sunday night).
For the TSP, the C-fund lost 0.65% on Friday, the S-fund fell 0.22%, the I-fund gave up 0.27%, and the F-fund (bonds) jumped 0.59%. For more on the weekly and monthly returns, please see our TSP Weekly Wrap-Up.
This deal, which will likely be voted on today, should produce at least short-term relief, but this may not be enough to give Moody's a reason to keep our credit rating at AAA. A move down to AA would probably do what everyone was afraid a default would do.
The S&P 500 is broken and needs help quickly so a rally today is very welcomed. Last week's losses pushed the index back below the 20 and 50-day EMA's, and it moved below the short-term support lines and the mid-July low.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The S&P approached the bottom of this year's trading range last week, but for the 3rd time in just over a month, the 200-day simple moving average has held (see below) and this is key. If we do get a rally today it helps the technical picture, but of course we need to see the EMA's and the new resistance lines (which were the old support lines above) taken out again on the upside. That 200-day MA is important, but when technical damage is done, good news is not always the end all solution.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I remember 2008 very well when the Dow sold off 800-points after the TARP vote failed to pass. Congress got the message from the market and passed it rather soon thereafter. But several months later the Dow was down another 4000-points, so what does that tell you about today's debt deal? It may or may not be a factor.
I will continue to look at the charts for clues and right now, with the S&P trading above the 200-day moving averages and inside the 6-month trading range, we have some reason to be hopeful. But if we see Friday's low taken out again, after this deal is official and the debt ceiling is raised, then we'll have to get very concerned. If the market wants to go down, and the "fix" of what had pushed it down does not establish a low, then it is the destiny of the market to go lower and we'll have to respect that and get out its way.
A quick look at the leading Dow Transportation Index shows that it had led the way down; taking out the mid-July low two days before the S&P 500 did. But notice how much the Transports rebounded on Friday - closing well off of the lows after finding support at the 200-day EMA. The Dow had lost 97-points, yet the Transports lost just 0.2%. Of course the indices have been down for 5 or 6 days in a row and a bounce is expected, but it's nice to see the leader show strength BEFORE the debt deal was made.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I posted this chart in the Weekly Wrap Up but I wanted to show that deal or no deal, the market had become very oversold and we were due for a rebound this week regardless.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The TSP Talk Sentiment Survey came in at 36% bulls, 55% bears, for a bulls to bears ratio of 0.65 to 1. That is another buy signal in a bull market so the system's allocation remains 100% S-Fund for this week. The system is up 4.60% for 2011 through Friday's close.
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.
Possible debt deal spells relief
The Dow lost 97-points on Friday capping a week that saw both the Dow and S&P 500 close down every day as the uncertainty of the debt negotiations lingered. Now we see the real possibility of a deal to raise the debt ceiling and the futures are pointing sharply higher (Sunday night).
For the TSP, the C-fund lost 0.65% on Friday, the S-fund fell 0.22%, the I-fund gave up 0.27%, and the F-fund (bonds) jumped 0.59%. For more on the weekly and monthly returns, please see our TSP Weekly Wrap-Up.
This deal, which will likely be voted on today, should produce at least short-term relief, but this may not be enough to give Moody's a reason to keep our credit rating at AAA. A move down to AA would probably do what everyone was afraid a default would do.
The S&P 500 is broken and needs help quickly so a rally today is very welcomed. Last week's losses pushed the index back below the 20 and 50-day EMA's, and it moved below the short-term support lines and the mid-July low.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The S&P approached the bottom of this year's trading range last week, but for the 3rd time in just over a month, the 200-day simple moving average has held (see below) and this is key. If we do get a rally today it helps the technical picture, but of course we need to see the EMA's and the new resistance lines (which were the old support lines above) taken out again on the upside. That 200-day MA is important, but when technical damage is done, good news is not always the end all solution.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I remember 2008 very well when the Dow sold off 800-points after the TARP vote failed to pass. Congress got the message from the market and passed it rather soon thereafter. But several months later the Dow was down another 4000-points, so what does that tell you about today's debt deal? It may or may not be a factor.
I will continue to look at the charts for clues and right now, with the S&P trading above the 200-day moving averages and inside the 6-month trading range, we have some reason to be hopeful. But if we see Friday's low taken out again, after this deal is official and the debt ceiling is raised, then we'll have to get very concerned. If the market wants to go down, and the "fix" of what had pushed it down does not establish a low, then it is the destiny of the market to go lower and we'll have to respect that and get out its way.
A quick look at the leading Dow Transportation Index shows that it had led the way down; taking out the mid-July low two days before the S&P 500 did. But notice how much the Transports rebounded on Friday - closing well off of the lows after finding support at the 200-day EMA. The Dow had lost 97-points, yet the Transports lost just 0.2%. Of course the indices have been down for 5 or 6 days in a row and a bounce is expected, but it's nice to see the leader show strength BEFORE the debt deal was made.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I posted this chart in the Weekly Wrap Up but I wanted to show that deal or no deal, the market had become very oversold and we were due for a rebound this week regardless.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The TSP Talk Sentiment Survey came in at 36% bulls, 55% bears, for a bulls to bears ratio of 0.65 to 1. That is another buy signal in a bull market so the system's allocation remains 100% S-Fund for this week. The system is up 4.60% for 2011 through Friday's close.
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.
