11/07/11
Stocks were down sharply to start the day on Friday after the less than exciting jobs report, but again much of that had to do with the Greek situation. We saw buyers stepping up as the day wore on and the final losses were only modest as the Dow went from being down nearly 200 in the morning, to down just 61 by the close.
For the TSP, the C-fund was down 0.62% on Friday, the S-fund slipped 0.16%, the I-fund lost 1.12%, and the F-fund (bonds) added 0.10%.
For more on the weekly and monthly returns, please see our TSP Weekly Wrap-Up.
I am going to cheat a little today and use our weekly wrap up commentary since it it basically my thoughts on what we are battling right now. I will just add this one indicator of the smart money OEX put/call ratio, which is currently my biggest concern as the smart money gets more and more bearish.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Whenever the charts and the indicators are giving conflicting stories, I will go with the charts. I am hoping that in this case the OEX put/call is a seasonality effect where the smart money protects their account with puts, while the market rallies into the end of the year. We saw that in 2010.
Anyway, this is from this past weekend's wrap up...
Volatility is normally a sign of concern for the market. The Volatility Index (VIX) has been high and it tends to be high when the market is falling, yet over the last 5-weeks stocks have done extraordinarily well so unless the daily charts break down, and that is a possibility, I won’t focus on the VIX and the swings, but instead watch the charts, so let’s take a look at the chart of the S&P 500 from three different time-frames.
The daily chart shows a breakout from a 3-month consolidation. It moved above the 200-day EMA (exponential moving average) and pulled back to successfully test the old highs and the EMA, and has now closed back above the 200 EMA for 3 straight days. We would like to see the S&P move above October highs to confirm the continuation of this breakout, but so far this looks pretty good.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
As we have talked about, the 3[SUP]rd[/SUP] year of a presidential term has been positive for the stock market since 1939. November and December are historically strong months for the market. This is good news for the market as we head into the end of the year. But here’s the bad news…
The weekly chart of the S&P 500 has potentially entered into a new downtrend after breaking below the rising trading channel that started when the bear market bottomed in March of 2009. This is why I would like to see the October highs get taken out, otherwise it could be the top of a new longer-term declining trading channel.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The monthly chart also shows this break down in the longer-term trend, and as you can see, these trends can last a long time.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Despite the breakdowns in the weekly and monthly charts, there is one positive technical sign that could help. The weekly and monthly charts are both trading above their 200 bar EMA’s (200-week EMA and the 200-month EMA) with the monthly chart 200-month EMA appearing to be tested and holding at the recent lows.
So again, we see some positives, especially in the short-term, but there are certainly cracks in the bigger picture. The headlines out of Europe continue to be the main catalysts and with volatility so high, I am concerned that bad news could really shake things up. That is why I have drawn some lines in the sand at the 200-day EMA and the support lines on the daily chart of the S&P 500. If they break, I think the negatives of the longer-term charts will unfortunately play out. If they hold, we should be able to ride a rally into the end of the year.
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.
Stocks were down sharply to start the day on Friday after the less than exciting jobs report, but again much of that had to do with the Greek situation. We saw buyers stepping up as the day wore on and the final losses were only modest as the Dow went from being down nearly 200 in the morning, to down just 61 by the close.
For the TSP, the C-fund was down 0.62% on Friday, the S-fund slipped 0.16%, the I-fund lost 1.12%, and the F-fund (bonds) added 0.10%.
For more on the weekly and monthly returns, please see our TSP Weekly Wrap-Up.
I am going to cheat a little today and use our weekly wrap up commentary since it it basically my thoughts on what we are battling right now. I will just add this one indicator of the smart money OEX put/call ratio, which is currently my biggest concern as the smart money gets more and more bearish.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Whenever the charts and the indicators are giving conflicting stories, I will go with the charts. I am hoping that in this case the OEX put/call is a seasonality effect where the smart money protects their account with puts, while the market rallies into the end of the year. We saw that in 2010.
Anyway, this is from this past weekend's wrap up...
Volatility is normally a sign of concern for the market. The Volatility Index (VIX) has been high and it tends to be high when the market is falling, yet over the last 5-weeks stocks have done extraordinarily well so unless the daily charts break down, and that is a possibility, I won’t focus on the VIX and the swings, but instead watch the charts, so let’s take a look at the chart of the S&P 500 from three different time-frames.
The daily chart shows a breakout from a 3-month consolidation. It moved above the 200-day EMA (exponential moving average) and pulled back to successfully test the old highs and the EMA, and has now closed back above the 200 EMA for 3 straight days. We would like to see the S&P move above October highs to confirm the continuation of this breakout, but so far this looks pretty good.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
As we have talked about, the 3[SUP]rd[/SUP] year of a presidential term has been positive for the stock market since 1939. November and December are historically strong months for the market. This is good news for the market as we head into the end of the year. But here’s the bad news…
The weekly chart of the S&P 500 has potentially entered into a new downtrend after breaking below the rising trading channel that started when the bear market bottomed in March of 2009. This is why I would like to see the October highs get taken out, otherwise it could be the top of a new longer-term declining trading channel.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The monthly chart also shows this break down in the longer-term trend, and as you can see, these trends can last a long time.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Despite the breakdowns in the weekly and monthly charts, there is one positive technical sign that could help. The weekly and monthly charts are both trading above their 200 bar EMA’s (200-week EMA and the 200-month EMA) with the monthly chart 200-month EMA appearing to be tested and holding at the recent lows.
So again, we see some positives, especially in the short-term, but there are certainly cracks in the bigger picture. The headlines out of Europe continue to be the main catalysts and with volatility so high, I am concerned that bad news could really shake things up. That is why I have drawn some lines in the sand at the 200-day EMA and the support lines on the daily chart of the S&P 500. If they break, I think the negatives of the longer-term charts will unfortunately play out. If they hold, we should be able to ride a rally into the end of the year.
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.
