5/22/12
Stocks finally found some support and rallied on "renewed optimism that European leaders would find a way out of the sovereign debt crisis." Whatever - it was relief rally due and the Dow gained 135-points, closing at the highs of the day.
[TABLE="align: center"]
[TR]
[TD]
[TD="align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"] C-fund:
[/TD]
[TD] +1.61%
[/TD]
[/TR]
[TR]
[TD="align: right"] S-fund:
[/TD]
[TD] +2.39%
[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:
[/TD]
[TD] +1.42%
[/TD]
[/TR]
[TR]
[TD="align: right"] F-fund:
[/TD]
[TD] - 0.07%
[/TD]
[/TR]
[TR]
[TD="align: right"] G-Fund:
[/TD]
[TD] +0.014%
[/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The S&P 500 found some support and was actually able to climb back to close above the 200-day EMA. It's too early to get excited because this can fall apart again quickly, but that is a nice first step in a rebound. A one or two day drop below the 200-day EMA is still a successful test as long as it holds going forward.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
A closer look shows that the steep downtrend is still intact so again, it's premature for the bulls to claim victory, but after the 11 down day out of 13, we 'should' get a little more out of a rally.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq is also back above the 200-day EMA, and while it would be a nice target, that open gap above seems like a long journey from here.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The dollar hit a double top and and if it can pullback for any length of time here - most likely on positive news out of Europe, then a relief rally in the stock market could last a little longer. But if we get more pessimism overseas, the dollar will likely make new highs and any kind of bottom for the S&P 500 would seem less likely.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The kind of performance we had yesterday, after the recent sell-off like we had, does not happen all that often. According to sentimenTrader.com, here is, "every other time since 1928 that the S&P had closed at at least a three-month low one day, then enjoyed its best one-day gain in at least two months. These are only instances that occurred when the index was trading above its 200-day moving average after the big rally day."
Chart provided courtesy of www.sentimentrader.com
"The short-term of 5-10 days was mixed-to-negative, and worse than random", but things improved greatly going out one month to a year.
As we talked about yesterday, a decline like we have just witnessed will likely revisit the lows again at some point, and perhaps more than once, but some of the relief rallies can last long enough to make some decent returns. I wish I could tell you how long this one will last, if it lasts at all. The key now is the recent low and that 200-day EMA. Since the S&P is currently sitting right on top of the 200 EMA, any close above it will be a positive. Any close below will have to treated with great caution.
Thanks for reading! We'll see you tomorrow.
Tom Crowley
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