TSP Talk Weekly Wrap Up - 07/10/10

Bear market rally?

After breaking down the week before the holiday, stocks rallied back strongly last week recouping those losses. Still, we have been seeing some longer-term negative signals, which does change things, but that doesn’t mean we can’t get short-term playable rallies.

For the week, the TSP stock funds rebounded strongly as the C-fund jumped 5.47%, the S-fund gained 5.34%, and the I-fund was up 5.04%. Bonds (F-fund) were down slightly, 0.02%, and the G-fund added 0.05%.

071010a.gif


This break back above the neckline of the head and shoulders pattern, threw us a curve as it is more common to see the neckline (near 1040-1045) act as resistance on the way back up.

071010b.gif

Charts provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Instead, we could be seeing a test of the head of the head and shoulders pattern.
071010c.gif

If you look at the chart of the S&P 500 above, my best guess upside targets are, the 200-day EMA (~1095), the descending trendline (also in the 1090-1100 area), and if those are able to be taken out, the middle of the head (1170-1175), then the April highs (over 1200).

I have no idea which one it will be, but I will be watching closely as it approaches each of those areas to see if resistance kicks in telling us the market wants to head down again.

The 50-day EMA did move below the 200-day EMA so for the sake of many of our indicators, we are looking at this as an official bear market. That doesn’t mean the market will go down every day, and this recent rally shows us just that. Oversold rallies do happen in bear markets, and they can be explosive. But we don’t want to let our guard down as things have changed.

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

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