09/29/11
Stocks opened higher yesterday, but lately the indices have been behaving like a roulette ball bouncing in and out of the red and black slots of a roulette wheel and only when it stops do we know how it will turn out. Yesterday, the early 95-point gain turned into a 180-point loss.
For the TSP, the C-fund fell 2.04% yesterday, the S-fund dropped 3.48%, the I-fund gave up 1.54%, and the F-fund (bonds) added 0.09%.
Only short-term traders have had any ability to make money over the last several weeks as we continue to have these 3 or 4 day rallies, followed by 3 to 4 day declines. As the S&P 500 heads back toward the lower end of the trading range between about 1120 and 1220, should we be looking to buy, or will it break below the range this time?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq had broken back into the rising wedge, but yesterday's decline took it right back below it and it is being repelled away from the 50-day EMA.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Volatility has remained quite high and the VIX (Volatility Index) is currently just above 41. Going back almost 20 years, the 40 to 50 range has been an area that has seen market declines find some footing. Only during the 2008 bear market did we see excessive panic as the VIX spent several months above 50, and even hit 80 a few times.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I have been looking for that next washout sell-off that can be bought but I don't know that we'll be seeing readings above 50 this time around. That is unless things turn out to be a lot worse than I thought. My thinking is that most of the markets worst case scenarios are already being priced in. If we see 45 or 50 again, fear will probably be high enough, panic will be in the air, and it could be the time to buy.
Bond yields have been rallying for the last few days but once again they are up again the 20-day EMA and at the top of the recent descending trading range.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I think that could translate into a little rally in the bond market (remember, bond prices and the F-fund go up when bond yields go down).
It never seems to work out the way I plan it, but a rally in bonds, accompanied by a sell-off in stocks that breaks below the lows, could be the recipe we need to see the panic sell-off I'm looking for to start buying again.
Being in a bear market, I'm just looking to grab some gains when we can. The 3 day rallies are playing with fire and with our 2 IFT (transfer) limit, I'm looking for a setup that can give us a sustained rally of weeks, not days. Whether that turns into the end of the bear market and the start of a bull market, I don't know. I'm not looking that far down the road. In a bear market I expect bearish results in the end. But there can be strong sustained rallies in bear markets and it is the only chance we get in our TSP funds to make any money [during a bear market].
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.
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.
