The whipsaw action continued on Thursday as quadruple witching expiration approaches. Big spikes higher, big declines, and everything in between, but the close is what matters, especially if you made a transaction in your TSP, and the indices closed near the lows of the day. The Dow lost 173 or 0.54%, which percentage-wise was one of the better performers of the day. The S&P and Nasdaq each lost over 1%, while the S and I funds were each down less than 1%. Bonds were down and yields closed near their highs of the year.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[/TD]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
Yesterday I mentioned some key intermediate support levels in a couple of the TSP Fund charts yesterday, which have held, but are being tested again right now. That's the 3900 area and the S&P closed at 3901 yesterday.
However the shorter term S&P 500 chart cracked yesterday - as you'll see in the next chart.
It's been a long time since we lived through a sustained bear market and some of you may be too young to remember. Once you go through one, it can change your outlook on everything stock market related. One characteristic of a bear market is that it tends to send stocks lower than we think possible, and then some more. And while that is happening, trading volume starts to rise as panic selling starts to eventually kick in.
We will get a spike in volume today because it is a quarterly options / futures contract expiration day, and that always triggers elevated trading, but that is not panic selling. That said, it may have been a coincidence that we saw a low on June's quadruple witching expiration day. Yesterday we saw a shorter-term support line give way, which shouldn't be a surprise in a bear market, and this is the kind of action that will eventually get investors closer to those panic trading levels and it usually means prices go lower than any of us expect.
Notice a couple of things here on this chart: Trading volume has been lower in general over the last few years but you can see that we haven't had any major spikes in trading volume, except for the 4+ billion shares traded on that June expiration day. Yesterday's 2.4 billion shares traded was slightly above the recent average. We will see a spike today but as I said it is expiration related.
Do you want to see what panic / capitulation selling volume looks like? Here's the 2008- 2009 chart. Back then 3 to 4 billion shares traded was normal and it was spikes up to 6, 8, and even near 10 billion shares that brought with it panic selling lows - even if just a temporary low. By March of 2009 when we saw 6 - 8 billion being traded every day, that was the final push toward a bottom and the start of the new bull market. We haven't seen anything like that yet, so that's one reason why I think we have further to go down.
Maybe today's expiration spike in volume will give us a temporary low, but bear market won't end with one high volume sell off. When we start hearing people say that they never want to buy stocks again, that's a pretty good sign that the bottom is getting close.
The yield on the 10-year Treasury closed at its second highest level of the year yesterday with a close of 3.46%. If we do get a high volume temporary low in stocks today, it could be triggered by a double top pullback here.
FedEx was trading down sharply after hours citing higher costs and softer demand. That should negatively impact the recently beleaguered Transportation Index, one of the market leaders, at least to start the day today, and the futures acted in sympathy with some after hours selling.
Some of the charts are approaching key levels that could be indicating at least another short term bounce coming. Today's high volume action could create a reversal. But next week is one of the worst week's of the year for stocks historically. Not every year, but on average. So bounce, or crash? It's getting real out there.
We went over the S&P 500 (C-fund) chart above.
The DWCPF (S-fund / small caps) is holding up slightly better than the S&P 500 chart but the formation looks similar and all I can do is watch to see if any of the supporter areas I drew in can hold. The ascending blue line here is the one that the S&P 500 chart fell below yesterday. If it holds here, maybe this will start to be come the leader, rather than lagging on the downside.
The EFA (I-fund) looks to be on a mission to test that double bottom low near 60. Double bottoms tend to hold. Triple bottoms are little less reliable.
BND (bonds / F-fund) is also looking to test its June lows, but if yields pullback from the double top they are showing on the 10-year yield chart up in the top section, this could get a bounce.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the 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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks so much for reading. Have a great weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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.
[TABLE="align: center"]
[TR]
[TD="align: center"]
[TD]
[/TD]
[TD="width: 338, align: center"] Daily TSP Funds Return
[TR]
[TD="align: right"][/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
Yesterday I mentioned some key intermediate support levels in a couple of the TSP Fund charts yesterday, which have held, but are being tested again right now. That's the 3900 area and the S&P closed at 3901 yesterday.
However the shorter term S&P 500 chart cracked yesterday - as you'll see in the next chart.
It's been a long time since we lived through a sustained bear market and some of you may be too young to remember. Once you go through one, it can change your outlook on everything stock market related. One characteristic of a bear market is that it tends to send stocks lower than we think possible, and then some more. And while that is happening, trading volume starts to rise as panic selling starts to eventually kick in.
We will get a spike in volume today because it is a quarterly options / futures contract expiration day, and that always triggers elevated trading, but that is not panic selling. That said, it may have been a coincidence that we saw a low on June's quadruple witching expiration day. Yesterday we saw a shorter-term support line give way, which shouldn't be a surprise in a bear market, and this is the kind of action that will eventually get investors closer to those panic trading levels and it usually means prices go lower than any of us expect.
Notice a couple of things here on this chart: Trading volume has been lower in general over the last few years but you can see that we haven't had any major spikes in trading volume, except for the 4+ billion shares traded on that June expiration day. Yesterday's 2.4 billion shares traded was slightly above the recent average. We will see a spike today but as I said it is expiration related.
Do you want to see what panic / capitulation selling volume looks like? Here's the 2008- 2009 chart. Back then 3 to 4 billion shares traded was normal and it was spikes up to 6, 8, and even near 10 billion shares that brought with it panic selling lows - even if just a temporary low. By March of 2009 when we saw 6 - 8 billion being traded every day, that was the final push toward a bottom and the start of the new bull market. We haven't seen anything like that yet, so that's one reason why I think we have further to go down.
Maybe today's expiration spike in volume will give us a temporary low, but bear market won't end with one high volume sell off. When we start hearing people say that they never want to buy stocks again, that's a pretty good sign that the bottom is getting close.
The yield on the 10-year Treasury closed at its second highest level of the year yesterday with a close of 3.46%. If we do get a high volume temporary low in stocks today, it could be triggered by a double top pullback here.
FedEx was trading down sharply after hours citing higher costs and softer demand. That should negatively impact the recently beleaguered Transportation Index, one of the market leaders, at least to start the day today, and the futures acted in sympathy with some after hours selling.
Some of the charts are approaching key levels that could be indicating at least another short term bounce coming. Today's high volume action could create a reversal. But next week is one of the worst week's of the year for stocks historically. Not every year, but on average. So bounce, or crash? It's getting real out there.
We went over the S&P 500 (C-fund) chart above.
The DWCPF (S-fund / small caps) is holding up slightly better than the S&P 500 chart but the formation looks similar and all I can do is watch to see if any of the supporter areas I drew in can hold. The ascending blue line here is the one that the S&P 500 chart fell below yesterday. If it holds here, maybe this will start to be come the leader, rather than lagging on the downside.
The EFA (I-fund) looks to be on a mission to test that double bottom low near 60. Double bottoms tend to hold. Triple bottoms are little less reliable.
BND (bonds / F-fund) is also looking to test its June lows, but if yields pullback from the double top they are showing on the 10-year yield chart up in the top section, this could get a bounce.
Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the 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
For more info our other premium services, please go here... www.tsptalk.com/premiums.html
To get weekly or daily notifications when we post new commentary, sign up HERE.
Thanks so much for reading. Have a great weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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.
