2/27/13
That is what a "snap-back" rally looks like. After the 216-point decline on Mondays the Dow rallied on Tuesday; gaining back 116 of those points. I told you the bulls would not give up easily, but do they have enough in them to to take the indices to new highs again?
[TABLE="width: 88%, align: center"]
[TR]
[TD]
[/TD]
[TD="align: center"]Daily TSP Funds Return[TABLE="width: 160"]
[TR]
[TD]G-Fund:[/TD]
[TD="align: right"]+0.0043%[/TD]
[/TR]
[TR]
[TD]F-fund:[/TD]
[TD="align: right"]+0.05%[/TD]
[/TR]
[TR]
[TD]C-fund:[/TD]
[TD="align: right"]+0.63%[/TD]
[/TR]
[TR]
[TD]S-fund:[/TD]
[TD="align: right"]+0.54%[/TD]
[/TR]
[TR]
[TD]I-fund:[/TD]
[TD="align: right"]-0.26%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 80%, align: center"]
[TR]
[TD="align: right"]More returns [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
This type of action can be confusing. Volatility picks up near market peaks and bull markets don't end on a dime, so the topping process can take some time.
The technical damage done on Monday is not something to forget about - at least not yet. The 20-day EMA broke recently but the 50-day EMA usually passes its first test in a bull market, and generates a little bounce. That looks like what we saw yesterday. But the 20-day EMA can act as resistance now.
Chart provided courtesy of www.decisionpoint.com
The Dow Transportation Index, usually considered "the" market leader, didn't really participate in yesterday's rally. That could be a warning sign, and perhaps it needs to test its 50-day EMA before it bounces.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The indicators are mixed depending on the timeframe you are looking at. The very short-term indicator below (CVI) has bounced from oversold back to neutral. The Intermediate-term indicator (STVO) is still oversold, and the longer-term indicator is still rolling over from overbought to neutral.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The longer term momentum indicators are all still on the overbought side and rolling over.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The S&P 500 hit a one month low this week, and according to sentimenTrader.com, when there is a positive reversal day, like the one we saw yesterday, on a day when the S&P hits that one-month low, the following few weeks have a pretty good record.
Chart provided courtesy of www.sentimentrader.com
I wonder what those results would be if they looked at the times when the Dow Transports didn't participate in the reversal?
Friday is March 1st and it is a tale of two months. The first half of March has a strong positive seasonal chart, while the 2nd half is much less favorable.
Chart provided courtesy of www.sentimentrader.com
This year March starts with the sequester cuts, which you would think the market has already priced in by now since almost everyone believes the cuts are inevitable. If anything, a last minute deal might be a negative for stocks because it would likely come with more tax increases in the form of reducing deductions, whereas the current deal is strictly spending cuts.
The $85 billion in spending cuts would slow down our country's dramatic increases in spending, and that helps the debt and deficit numbers, which the market might prefer. Also, the $85 billion wouldn't be cut all at once. It is a slower process than that and many of us may not feel any effect. Of course those who are directly impacted because of furloughs, layoffs, or cuts in services would obviously feel differently. Also, the cuts could take something away from our GDP, so it's questionable how the market will react.
I was wrong about the jobs report. Normally released on the first Friday of the month, it is not scheduled to be released this Friday March 1, but rather next Friday, March 8. There are no estimates yet.
Thanks for reading! We'll see you 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.
That is what a "snap-back" rally looks like. After the 216-point decline on Mondays the Dow rallied on Tuesday; gaining back 116 of those points. I told you the bulls would not give up easily, but do they have enough in them to to take the indices to new highs again?
[TABLE="width: 88%, align: center"]
[TR]
[TD]
[TD="align: center"]Daily TSP Funds Return[TABLE="width: 160"]
[TR]
[TD]G-Fund:[/TD]
[TD="align: right"]+0.0043%[/TD]
[/TR]
[TR]
[TD]F-fund:[/TD]
[TD="align: right"]+0.05%[/TD]
[/TR]
[TR]
[TD]C-fund:[/TD]
[TD="align: right"]+0.63%[/TD]
[/TR]
[TR]
[TD]S-fund:[/TD]
[TD="align: right"]+0.54%[/TD]
[/TR]
[TR]
[TD]I-fund:[/TD]
[TD="align: right"]-0.26%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 80%, align: center"]
[TR]
[TD="align: right"]More returns [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
This type of action can be confusing. Volatility picks up near market peaks and bull markets don't end on a dime, so the topping process can take some time.
The technical damage done on Monday is not something to forget about - at least not yet. The 20-day EMA broke recently but the 50-day EMA usually passes its first test in a bull market, and generates a little bounce. That looks like what we saw yesterday. But the 20-day EMA can act as resistance now.
Chart provided courtesy of www.decisionpoint.com
The Dow Transportation Index, usually considered "the" market leader, didn't really participate in yesterday's rally. That could be a warning sign, and perhaps it needs to test its 50-day EMA before it bounces.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The indicators are mixed depending on the timeframe you are looking at. The very short-term indicator below (CVI) has bounced from oversold back to neutral. The Intermediate-term indicator (STVO) is still oversold, and the longer-term indicator is still rolling over from overbought to neutral.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The longer term momentum indicators are all still on the overbought side and rolling over.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The S&P 500 hit a one month low this week, and according to sentimenTrader.com, when there is a positive reversal day, like the one we saw yesterday, on a day when the S&P hits that one-month low, the following few weeks have a pretty good record.
Chart provided courtesy of www.sentimentrader.com
I wonder what those results would be if they looked at the times when the Dow Transports didn't participate in the reversal?
Friday is March 1st and it is a tale of two months. The first half of March has a strong positive seasonal chart, while the 2nd half is much less favorable.
Chart provided courtesy of www.sentimentrader.com
This year March starts with the sequester cuts, which you would think the market has already priced in by now since almost everyone believes the cuts are inevitable. If anything, a last minute deal might be a negative for stocks because it would likely come with more tax increases in the form of reducing deductions, whereas the current deal is strictly spending cuts.
The $85 billion in spending cuts would slow down our country's dramatic increases in spending, and that helps the debt and deficit numbers, which the market might prefer. Also, the $85 billion wouldn't be cut all at once. It is a slower process than that and many of us may not feel any effect. Of course those who are directly impacted because of furloughs, layoffs, or cuts in services would obviously feel differently. Also, the cuts could take something away from our GDP, so it's questionable how the market will react.
I was wrong about the jobs report. Normally released on the first Friday of the month, it is not scheduled to be released this Friday March 1, but rather next Friday, March 8. There are no estimates yet.
Thanks for reading! We'll see you 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.
