The bleeding continues

5/17/12

Stocks rallied out of the gate yesterday on positive economic data, but sellers came in and the word on the street that it was because of Greece again. An early 90-point gain turned into a 33-point loss for the Dow by the close.
[TABLE="align: center"]
[TR]
[TD]

[/TD]
[TD="align: center"] Daily TSP Funds Return

[TABLE="align: center"]
[TR]
[TD="align: right"] C-fund:
[/TD]
[TD] - 0.41%
[/TD]
[/TR]
[TR]
[TD="align: right"] S-fund:
[/TD]
[TD] - 0.72%
[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:
[/TD]
[TD] - 0.47%
[/TD]
[/TR]
[TR]
[TD="align: right"] F-fund:
[/TD]
[TD] - 0.01%
[/TD]
[/TR]
[TR]
[TD="align: right"] G-Fund:
[/TD]
[TD] +0.004%
[/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The S&P 500 has been down 9 of the last 11 days - certainly more serious than a little pullback - and it is now down 6.4% from it's May 1st high, and 6.8% below the 2012 high made in early April.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The 200-day EMA is just 10-points below the current level and I would assume that the first test would hold in a bull market - like it did on the first test in 2011, but we usually get a little bounce when the 20-day EMA moves below the 50-day EMA and that did not happen, so of course nothing is certain.

The Nasdaq broke below that 2900 level that tried so hard to hold. The downtrend is here and while there is a good chance for a relief rally, there are enough red flags to start concentrating on selling the rallies, at least while the indices are below the 50-day EMA's.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The damage in the U.S. markets has been modest with the 6% losses, but in Europe they are being hit even harder, and all three of the major indices over there are trading below the 200-day EMA:

The London FTSE...

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The German DAX:

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

And the French CAC:

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The indicators are screaming for a bounce, but the charts are not telling a good tale. Our question going forward will be whether to trust any rally. Lately they have all failed but eventually one will stick for a few days, but then what? I will be curious to see if buyers step up if we do test the 200-day EMA, and how much conviction they will have. In 2011 the rally off of the first test of the 200-day EMA was a gain of 8.0%. Not something I'd want to miss. But seasonality is just so bad this time of May.

Thanks for reading! We'll see you back here tomorrow.

Tom Crowley


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[amoeba]

Bottom isn't very sharp, volume increasing further today, 200 EMA in SPY not holding, and selling accelerating at the close; looks like averaging down and out for the month, and maybe for the rest of the summer. Euro dragging all markets down. Expect this to continue up to June FOMC mtg (~18th), and perhaps longer.

 

[WhoDey]

Tom,

I appreciate your posts and, as a relative newcomer, I've learned much from the information you share.

With the C, S, and I funds struggling, the F fund is looking like an attractive safe haven. Safe like the G fund, yet offering a bit more in returns.

That said, I don't have a good understanding of how the F fund works, the potential for upside action, and what risks are involved. With interest rates so low, I wonder about the prospects for the fund over the next few months (summer). The fund has had a good run, but is there more upside or is this fund, like the others, vulnerable to a downward slide.

Long winded way to ask if you could devote some space in a future post to the F fund.

Thanks.