The Fed Spoils the Relief Rally
Last week started out well for the stock market and by Wednesday morning we were looking at a 5[SUP]th[/SUP] consecutive positive day for the S&P 500. At 2:15 PM ET on Wednesday the Federal Reserve announced their FOMC policy statement and as you can see in the 5-day chart below, things went south in a hurry.
There were no real big surprises, but the Fed’s negative outlook seemed to be a sobering splash of cold water in the face of the market which was looking to rebound from a 6+ week pullback.
For the TSP, the C-fund was down 0.22% for the week. The S-fund led the way with a gain of 1.59% and that is actually a bullish sign for stocks, while The I-fund lost 0.76%. Bonds (F-fund) gained 0.32%, and the G-fund was up 0.05%.
For the month, the C-fund is down 5.59%, the S-fund has lost 5.90%, and the I-fund has given up 5.53%, while bonds (F-fund) are up 0.60%, and the G-fund is up 0.17% in June.
The chart of the S&P 500 (our C-fund) shows that the index is desperately clinging to the 200-day EMA. There is strong support in this 1260 area but should that break, it could get ugly.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
As long as the index remains above the 200-day EMA there is hope that the worst of the selling is over. On the other hand, as long as the 50-day EMA is declining and the S&P continues to trade below it,we really need to be a little cautious as this a negative breakdown and investors will look for reasons to sell rather than buy.
As I said, there is strong support in the 1260 area with the 200-day EMA sitting near 1263 (see above chart) and the long-term bull market support coming up from the March 2009 lows as you can see in the weekly chart of the S&P 500 below.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Like many people, I am on the fence believing this market can either hold the current support and rally for a few weeks, or it could break down and we could be at the start of something a little more severe than a pullback.
If you are more of a cautious, conservative investor, sitting in the G or F funds while the market negotiates its next move is not a bad idea. If you are more of the aggressive type who likes to roll the dice, being in stocks here represents a decent risk/reward play, if you are willing to sell should the S&P 500 break below those key support levels.
Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.
Tom Crowley
www.tsptalk.com
Weekly Wrap-Ups Archive
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.
Last week started out well for the stock market and by Wednesday morning we were looking at a 5[SUP]th[/SUP] consecutive positive day for the S&P 500. At 2:15 PM ET on Wednesday the Federal Reserve announced their FOMC policy statement and as you can see in the 5-day chart below, things went south in a hurry.
There were no real big surprises, but the Fed’s negative outlook seemed to be a sobering splash of cold water in the face of the market which was looking to rebound from a 6+ week pullback.
For the TSP, the C-fund was down 0.22% for the week. The S-fund led the way with a gain of 1.59% and that is actually a bullish sign for stocks, while The I-fund lost 0.76%. Bonds (F-fund) gained 0.32%, and the G-fund was up 0.05%.
For the month, the C-fund is down 5.59%, the S-fund has lost 5.90%, and the I-fund has given up 5.53%, while bonds (F-fund) are up 0.60%, and the G-fund is up 0.17% in June.
The chart of the S&P 500 (our C-fund) shows that the index is desperately clinging to the 200-day EMA. There is strong support in this 1260 area but should that break, it could get ugly.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
As long as the index remains above the 200-day EMA there is hope that the worst of the selling is over. On the other hand, as long as the 50-day EMA is declining and the S&P continues to trade below it,we really need to be a little cautious as this a negative breakdown and investors will look for reasons to sell rather than buy.
As I said, there is strong support in the 1260 area with the 200-day EMA sitting near 1263 (see above chart) and the long-term bull market support coming up from the March 2009 lows as you can see in the weekly chart of the S&P 500 below.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Like many people, I am on the fence believing this market can either hold the current support and rally for a few weeks, or it could break down and we could be at the start of something a little more severe than a pullback.
If you are more of a cautious, conservative investor, sitting in the G or F funds while the market negotiates its next move is not a bad idea. If you are more of the aggressive type who likes to roll the dice, being in stocks here represents a decent risk/reward play, if you are willing to sell should the S&P 500 break below those key support levels.
Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.
Tom Crowley
www.tsptalk.com
Weekly Wrap-Ups Archive
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.
