The volatility continued on Wall Street and we saw the bulls and bears really battle it out on Tuesday with the bears claiming a victory by the close. As fast as they went up in the morning, the indices came down in afternoon trading and the Dow ended the day down 28-points. Small caps were the big loser again.
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The I-fund held up because the selling in U.S. stocks started after their European markets closed. Bonds were basically flat but they also fell late and lost early gains.
Here are the final monthly returns for October, and the current annual returns.
The SPY (S&P 500 / C-fund) broke above the steep falling wedge, and that's a good sign, but the 20-day EMA held it back on Tuesday after some nice early gains. It remains in a consolidation box (blue) that we have seen several times during this bull market and so far most of them have broken to the upside. It closed just below the 50-day EMA which isn't good, but it's still in the neighborhood.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The S&P 500 chart looks a heck of a lot better than the small cap charts and I keep wondering which will happen first: Will the S&P breakdown like the small caps, or will the small caps start to catch up to the S&P 500 and large caps?
The Wilshire 4500 (S-Fund) fell back below the 200-day EMA and moved a hair below the August 1st low. It was the lowest close in the Wilshire since May. We're either on the verge of a big catch-up rally, or small caps are about to seriously break down They are oversold and probably won't crash from here, but the trend is down and investors may keep selling the rallies until they are proven wrong.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Russell 2000 (small caps) made a four month low yesterday and we have a classic downtrend. But as I said above, they are oversold and will eventually try to lure investors in with a relief rally.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The weekly chart of the Russell 2000 shows it below the 50-week moving average again. It has broken through some support which continues to be a warning sign, and the 1080 area looks like a make or break area for the long-term picture.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE / I-fund) was relatively flat yesterday but we didn't see any kind of snap back rally after it broke through the August lows on Monday. More warning signs although the I-fund and S-fund have been flashing many warning signs for months.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The 62-year chart from 1950 - 2011 shows October is not a bad month historically, despite its negative reputation because of some historic market crashes in 1929 and 1987. And as we've posted several times, it has performed even better during mid-term election years.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
The AGG (Bonds / F-fund) closed slightly lower after losing some early gains. The short-term rising trend remains intact, but there are some bear flag like qualities here.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
We get the September jobs report on Friday. Estimates are looking for a gain of about 205,000 jobs and an unemployment rate of 6.1%. The jobs report contest has been started in the Forum.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the Sentiment Survey Results and its TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
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.
