10/16/12
Stocks rallied yesterday as the Dow and S&P 500 held onto some key support levels - at least for now. The Dow gained 95-points on the day and the three TSP stock funds each saw approximately 3/4 of a percent gains.
[TABLE="width: 88%, align: center"]
[TR]
[TD="width: 241"]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 154"]
[TR]
[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] 0.0114%[/TD]
[/TR]
[TR]
[TD="align: right"] F-fund:[/TD]
[TD="align: right"] 0.00%[/TD]
[/TR]
[TR]
[TD="align: right"] C-fund:[/TD]
[TD="align: right"] 0.81%[/TD]
[/TR]
[TR]
[TD="align: right"] S-fund:[/TD]
[TD="align: right"] 0.69%[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:[/TD]
[TD="align: right"] 0.74%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 80%, align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The S&P 500 moved back into the rising trading channel and back above the support line created by the April and August highs. The 50-day EMA held for another day and the 20-day EMA is acting as resistance - for the 4th day in a row. The action is getting better but a move above the 20-day EMA and the highs of the prior 4 days will look a lot better for the short-term.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transportation Index put in its highest close since September 19th but is still battling the 200-day EMA. Whenever an index repeatedly tests a support or resistance line, or a moving average, it tends to break it. If you knock enough times, eventually someone is going to let you in.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The small caps rallied, but the Russell 2000 is still lagging. I mentioned the possible flag formation (red) that we may be seeing, which is bullish, but even more bullish is a falling wedge pattern (blue / red) that we would have if we ignore the spike created by the jobs report on October 5th.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The NYSE is back on the overbought side, but basically this chart is neutral. The -250 area has been holding and we've seen rallies continue from this level going back to the early June low.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I have been watching with great interest, the smart money getting very bearish lately, as least as far as the OEX put/call ratio goes. These puts and calls are options and most of the time options are used as a hedge against positions in the market. So, it dawned on me as as I was doing my research: If you owned a bunch of stock, and the uncertainty of the possible fiscal cliff was looming (come January) wouldn't you want to add a lot of of protection to your account? Sound reasonable.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The fiscal cliff, of course, is what they are calling what is going to happen in January when the tax cuts expire, the payroll tax holiday ends, and the automatic spending cuts are implemented. Here is a lit of things that will happen in January if a deal is not made beforehand... Fiscal cliff: What's really in it? - Aug. 6, 2012
So this is why the smart money may be going heavy on put options. These will benefit if the market goes down, hedging any losses they may encounter with losses in the stocks.
I'm not overly excited by the market and what may be coming, but the charts and indicators are shaping up for the short-term and you'd never know by the fact that we are just off the recent highs that something that could be devastating to the market might be around the corner. Don't go to sleep this fall / winter. Things could change in a hurry.
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.
