So much for the quiet pre holiday week. I ended Thursday's commentary by saying, "When will the bubble pop? Probably when we least expect it." We knew that was probably coming soon, but I did not expect it this week. The complacency was there, the positive pre-holiday bias was there, so the pros probably just took advantage of the situation as the bulls had been lulled to sleep in recent days / weeks. I have been on the defensive side and wanted to get more defensive after the holiday, but the market humbled me again and we got what least expected to happen yesterday.
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It's too early to say whether this was a buyable decline or not. The losses yesterday wiped out only about 6 days of gains, which was a lot, but stocks have been rallying for 5 months, and have been going virtually straight up for the last 9 weeks.
This will make a mess of the charts but it will also firm up some support and resistance areas. Yesterday's low in the S&P 500 was right near the 20-day EMA. It is still 100+ points above the 50-day EMA, and a more than 300 above the 200-day average. Those are normal pullback targets, but why in the world did it all fall apart two days before a holiday weekend?
Was it a trap by the pros? Were they tired of the high prices and wanted to trigger the retail and mom and pop investors to bail so they can scoop up their favorite stocks at lower price next week when we're panicking? Or was this just the exhale we've been waiting for, and that the market really needed after getting so stretched?
What will be going through investor's minds will be whether to approach the market from a fundamental standpoint, where we know valuations are at historic highs. If that's the case we would certainly have more downside to go. However this has been a stimulus and liquidity triggered market ever since the Fed opened up the spigots to cheap and easy money. If that's the angle, we could see folks buying the dips right away again. So which is it going to be?
The buy the dips crowd has been right for so long now, can they change their ways? Then there's the folks who have a memory more than a few months back and recall March and how bad things can get.
There was a bounce into the close pushing the indices off their lows, so the bulls are hoping that 20-day EMA test was the low. However, after a day of carnage like that, there tends to be at east a few days of angst and volatility before things head right back up.
Unfortunately I don't think today will tell us too much. Next week, the week after labor Day weekend, tends to start slow (lighter trading) then builds as the week goes on, but after Thursday's action, I don't know if we can expect anything typical.
As if yesterday wasn't fun enough, today (Friday) we get the August jobs report. Estimates are looking for a gain of 1.2 million jobs, and an unemployment rate of 9.8%. Per www.tsp.gov website: HOLIDAY CLOSING - Some financial markets will be closed on Monday, September 7 in observance of the Labor Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (September 7) will be processed Tuesday night (September 8), at Tuesday's closing share prices.
The S&P 500 (C-fund) fell sharply from all-time highs, all the way down to the 20-day EMA in one day. That's quite a one day move, but it is still well above the other averages and considered extended. The question is, can the dip buyers be patient enough to watch this have a real correction (10% or more?) One small gap from Wednesday was filled yesterday, but there are still three other gaps down below. The weekly chart (not shown) still has an open gap near 3400, where that first open gap in this chart is.
The DWCPF (S-fund) got clobbered with the rest of the market. It also has some major open gaps below, but the worst news here is that the rising trading channel has broken on this chart.
The EFA (I-fund) came down to fill in one of its large open gaps yesterday. There are others below, but that was the big one. So far it looks like Wednesday's mini breakout, was a fake out.
The Equal Weighted S&P 500 Index ETF was down, although not quite as much as those high flying indices. It also closed right on the rising support line of its trading channel. It is now back below the June high and the loss really only gave back the gains from the last two days on this one, so internally the market maybe wasn't as bad as it looked.
The VIX busted through the 200-day EMA and pushed all the way up to 36 before pulling back in the final moments of trading to settle at 33 and change. That's still quite high and it tells us investors are ready for more volatility.
BND (F-fund) was up slightly but erased an early gain. It looks like a possible negative reversal candlestick pattern, but this bond market chart doesn't always seem to play well with the typical formations.
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
Thanks for reading. Have a great Labor Day weekend! See you on Tuesday.
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.
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It's too early to say whether this was a buyable decline or not. The losses yesterday wiped out only about 6 days of gains, which was a lot, but stocks have been rallying for 5 months, and have been going virtually straight up for the last 9 weeks.
This will make a mess of the charts but it will also firm up some support and resistance areas. Yesterday's low in the S&P 500 was right near the 20-day EMA. It is still 100+ points above the 50-day EMA, and a more than 300 above the 200-day average. Those are normal pullback targets, but why in the world did it all fall apart two days before a holiday weekend?
Was it a trap by the pros? Were they tired of the high prices and wanted to trigger the retail and mom and pop investors to bail so they can scoop up their favorite stocks at lower price next week when we're panicking? Or was this just the exhale we've been waiting for, and that the market really needed after getting so stretched?
What will be going through investor's minds will be whether to approach the market from a fundamental standpoint, where we know valuations are at historic highs. If that's the case we would certainly have more downside to go. However this has been a stimulus and liquidity triggered market ever since the Fed opened up the spigots to cheap and easy money. If that's the angle, we could see folks buying the dips right away again. So which is it going to be?
The buy the dips crowd has been right for so long now, can they change their ways? Then there's the folks who have a memory more than a few months back and recall March and how bad things can get.
There was a bounce into the close pushing the indices off their lows, so the bulls are hoping that 20-day EMA test was the low. However, after a day of carnage like that, there tends to be at east a few days of angst and volatility before things head right back up.
Unfortunately I don't think today will tell us too much. Next week, the week after labor Day weekend, tends to start slow (lighter trading) then builds as the week goes on, but after Thursday's action, I don't know if we can expect anything typical.
As if yesterday wasn't fun enough, today (Friday) we get the August jobs report. Estimates are looking for a gain of 1.2 million jobs, and an unemployment rate of 9.8%. Per www.tsp.gov website: HOLIDAY CLOSING - Some financial markets will be closed on Monday, September 7 in observance of the Labor Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Monday night (September 7) will be processed Tuesday night (September 8), at Tuesday's closing share prices.
The S&P 500 (C-fund) fell sharply from all-time highs, all the way down to the 20-day EMA in one day. That's quite a one day move, but it is still well above the other averages and considered extended. The question is, can the dip buyers be patient enough to watch this have a real correction (10% or more?) One small gap from Wednesday was filled yesterday, but there are still three other gaps down below. The weekly chart (not shown) still has an open gap near 3400, where that first open gap in this chart is.
The DWCPF (S-fund) got clobbered with the rest of the market. It also has some major open gaps below, but the worst news here is that the rising trading channel has broken on this chart.
The EFA (I-fund) came down to fill in one of its large open gaps yesterday. There are others below, but that was the big one. So far it looks like Wednesday's mini breakout, was a fake out.
The Equal Weighted S&P 500 Index ETF was down, although not quite as much as those high flying indices. It also closed right on the rising support line of its trading channel. It is now back below the June high and the loss really only gave back the gains from the last two days on this one, so internally the market maybe wasn't as bad as it looked.
The VIX busted through the 200-day EMA and pushed all the way up to 36 before pulling back in the final moments of trading to settle at 33 and change. That's still quite high and it tells us investors are ready for more volatility.
BND (F-fund) was up slightly but erased an early gain. It looks like a possible negative reversal candlestick pattern, but this bond market chart doesn't always seem to play well with the typical formations.
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
Thanks for reading. Have a great Labor Day weekend! See you on Tuesday.
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.
