Stocks ended last week with a solid rally as the Dow added another 128-points. This week's focus will be on the FOMC meeting, and after several years of easy money, Quantitative Easing (QE) is scheduled to come to an end at the end of the week. The recent rebound in stocks may have cemented it.
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All of the TSP funds ended in positive territory on Friday and the week ended with strong gains for the stock funds. Those recent gains have pushed the S-fund into positive territory for the month of October, and the C-fund is now just down 0.28%. That was quite a run from where they were a couple of weeks ago. The I-fund continues to lag as the economic slowdown in Europe has been weighing heavily on the overseas markets.
The SPY (S&P 500 / C-fund) has rallied 8% off of the October 15 low and has erased almost all of October's losses. The PMO indicator has moved back above its 10-day average and you can see in August the market rallied for another month before peaking, after that PMO crossover.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The SPY is back above all of the major moving EMA's (Exponential Moving Averages), which is what we follow here, but many also follow the Simple Moving Averages (SMA) so we better take a look...
The 50-day SMA (red) is sitting at 196.36 and that could act as some resistance, at least temporarily as there are a lot of profits to be had for anyone who made money on the way back up. Investors can get a little tight / defensive when they've lost a lot of money, and then got it all back. This could be a place where they put some cash in their pocket to see where things go before committing again.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The weekly chart of the SPY shows the dramatic low we saw this month, and the powerful rebound. It never did close below the 50-week moving average, but it did break the rising trading channel (red) and sometimes the old support, once broken, can act as resistance.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) has had a big run up and has inched above its 50 and 200-day EMAs. The 50-day SMA (not shown) is up near 1011.
Chart provided courtesy of www.stockcharts.comm, analysis by TSP Talk
The EFA (EAFE Index / I-fund) continues to lag as we've talked about, and it is either the biggest bargain of the TSP stock funds, or its relative weakness is a warning sign that Europe is not ready to recover from its economic slowdown.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The VIX (fear indicator) was cut in half during the market rebound but seems to be stabilizing near 16. There are two open gaps on the chart - a small one near 13 and a larger one above 24. Both will get filled eventually but of course the big question is, which one will be first? The answer to that may tell us if we get a test of the recent lows or if stocks rally toward new highs.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) was up slightly but remains in a short-term downtrend since the peak on October 15. I believe the longer-term trend in bonds may have turned negative, but in the short-term there could be a relief rally. The 20-day EMA is being tested now.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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Thanks for reading! We'll see you back here tomorrow.
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.
