08/19/13
After a couple of big triple digit moves in the Dow on Wednesday and Thursday, Friday was rather quiet although the bears were able to win the battle and push stocks a little lower. The Dow ended the day down 31-points.
Friday was options expiration and they tend to be low volatility days and you can say there is some manipulation involved as money manager try to keep expiring options near specific strike prices.
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[TD="align: center"] Daily TSP Funds Return[TABLE="width: 157"]
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[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] +0.0056%[/TD]
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[TD="align: right"] F-fund:[/TD]
[TD="align: right"] -0.35%[/TD]
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[TD="align: right"] C-fund:[/TD]
[TD="align: right"] -0.32%[/TD]
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[TD="align: right"] S-fund:[/TD]
[TD="align: right"] -0.31%[/TD]
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[TD="align: right"] I-fund:[/TD]
[TD="align: right"] +0.50%[/TD]
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[TD="align: right"] [/TD]
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The I-fund managed a gain because of a late move down in the dollar on Thursday, and U.S. stocks were actually up when the European markets closed on Friday morning.
The S&P 500 (SPY) fell below the 50-day EMA on Friday (and the SMA - Simple Moving Average) rather than rebound off that support. That's not the greatest sign for stocks, and we'll have to watch the 3 to 5 day rule to see if the S&P can recapture it and make it a false breakdown, rather than an actual breakdown.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Thursday's high volume reversal day did give the Dow Transportation Index the positive follow-through we'd expect, as the index rallied 0.7% on Friday. The high of the day hit the 50-day EMA, which also filled the recently opened gap, and this is clearly an important test for the Transports, although the 20-day EMA and a new descending resistance line, are just overhead and could get tested. Notice that the new descending resistance line is perpendicular to the old rising support line? I like clean technical analysis like that.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The small caps of the Russell 2000 made a lower low last week like the other indices, and Friday's decline to the 50-day EMA nearly filled a gap left open in early July. This could be at least short-term support and any rally would probably target the new overhead open gap - if the bulls are lucky.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Looking at some of the short-term indicators ...
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[TD="align: left"] We interrupt today's commentary with an important announcement:
After nearly 10 years of writing a daily market commentary here at TSP Talk, I am going to begin my own Premium Service that I will call "TSP Talk Plus". I will continue to provide a free basic daily market commentary right here, but TSP Talk Plus will provide a little extra.
With Scribbler and more recently Ebbchart, moving onto other endeavors in the last year, and the sudden health issues that caused Trader Fred to hastily retire this past spring, I thought it would be a good time to introduce this service which I have been considering for some time.
I am very close to having the service I want but I'm still working on some minor details. I will explain it all very soon, but here are a couple of quick "wills and won'ts".
- The service WILL NOT give my personal allocation signals like our current premium services.
- The service WILL include the TSP Talk Sentiment Survey data with the buy and sell signals. The bull / bear survey results will still be posted publically, but the System signals will only be posted in this new premium service with added commentary about the results.
- Forum members will be given additional privileges which will be posted once finalized.
- AutoTracker members will also see some "extras", also to be announced soon.
- The price will be very reasonable with an additional discount to subscribers of our other premium services.
Sign into the Premium Services area for a Sneak Peek into what you might expect. If you don't have a current login, it's free to get started. If you don't have a login to the premium area yet, here is how to create one: Create Account. If you need help, please read FAQ #1... How do I sign up? or watch this quick instructional video. If you have an account, just login - www.tsptalk.com/members.
More info to follow:[/TD]
[/TR]
[/TABLE]
[TR]
[TD="align: left"] We interrupt today's commentary with an important announcement:
After nearly 10 years of writing a daily market commentary here at TSP Talk, I am going to begin my own Premium Service that I will call "TSP Talk Plus". I will continue to provide a free basic daily market commentary right here, but TSP Talk Plus will provide a little extra.
With Scribbler and more recently Ebbchart, moving onto other endeavors in the last year, and the sudden health issues that caused Trader Fred to hastily retire this past spring, I thought it would be a good time to introduce this service which I have been considering for some time.
I am very close to having the service I want but I'm still working on some minor details. I will explain it all very soon, but here are a couple of quick "wills and won'ts".
- The service WILL NOT give my personal allocation signals like our current premium services.
- The service WILL include the TSP Talk Sentiment Survey data with the buy and sell signals. The bull / bear survey results will still be posted publically, but the System signals will only be posted in this new premium service with added commentary about the results.
- Forum members will be given additional privileges which will be posted once finalized.
- AutoTracker members will also see some "extras", also to be announced soon.
- The price will be very reasonable with an additional discount to subscribers of our other premium services.
Sign into the Premium Services area for a Sneak Peek into what you might expect. If you don't have a current login, it's free to get started. If you don't have a login to the premium area yet, here is how to create one: Create Account. If you need help, please read FAQ #1... How do I sign up? or watch this quick instructional video. If you have an account, just login - www.tsptalk.com/members.
More info to follow:[/TD]
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The following type of analysis may not be in the free basic daily market commentary, but will be in TSP Talk Plus...
Looking at some of the short-term indicators you can see that many are nearing some extreme oversold readings. Going back one year you can see that these indicators didn't get much lower than current readings before rebounding. But what if we pulled back a little...
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
But these same indicators going back 3-years shows that these oscillators can get a lot more extreme during weak market environments.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Another noteworthy point to make is the negative divergence we are seeing in all of these indicators. The S&P 500 was making a higher high in July and August compared to the high made in May, yet these indicators all made lower highs.
Bond yields have broken out above recent highs, putting more pressure on the F-fund.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
While the long-term trend in bond yields is down, and has been since the 1980's, the short-term trend has been up, and there is still some room on the long-term descending trading channel for yields to move higher. Should this long-term resistance hold, there is still a chance the 10-year yield could move toward 4%. It is currently 2.8%.
Chart provided courtesy of Chart of the Day, analysis by TSP Talk
After a 300+ point loss in the Dow on Wednesday and Thursday, it was not surprising to see our reader's sentiment fall back to an extremely bearish in our Sentiment Survey this week with bulls (30%) being outnumbered by the bears (61%) by more than 2 to 1. That is a buy signal but remember that the system stayed in the S-fund during the June pullback as well. If we do see a more serious pullback, unfortunately it would be very unlikely that we would see a sell signal from the system in time to get out.
Despite last week's scare, the indices are just a few percentage points off the recent highs. The Hindenburg Omen signals may have warned us of this pullback, but these signals don't just tell us when a pullback is coming. They have also preceded some serious corrections and even crashes, so anyone considering buying this dip, something that has worked repeatedly this year, may want to use a little more caution.
This Hindenburg Omen Signal data was posted earlier this month in our forum...
73% chance there will NOT be a major stock market crash
Decline of at least 2-5% -- 92% chance
Decline of at least 5-8% -- 77% chance
Decline of at least 8-10% -- 54% chance
Decline of at least 10-15% -- 39% chance
Decline of more than 15% -- 27% chance
We've already had the 2-5% decline. With the chances of a 10% correction being 54% (46% against), I'd say a little defense may be warranted and not a time to get overly aggressive.
Moreover, forum member bmneveu continues to update us on the Hindenburg Omen situation in the Hindenburg Omen thread. His latest post included a link to a website that has done some extra research on the signals, and found out some interesting information. Basically, rather than the number of signals and how close together they are, it seems the trend is that the faster the market goes up into a signal, the faster it comes down after a signal. More at Albertarocks' TA Discussions.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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