Looking for clues in the charts
After a couple of bad months in May and June, stocks came roaring back in July with the help of positive corporate earnings. Historically, August and September have been trouble months for the stock market so there is some work to do to keep the summer rally going.
For the week, the TSP funds were mixed as the C-fund slipped 0.07%, the S-fund fell 0.15%, and the I-fund added 0.65%. Bonds (F-fund) rallied 0.54% and the G-fund added 0.06%.
The TSP stock funds had a great month in July. The C and S-funds each picked up 7.0%, while the I-fund jumped 10.78%, taking advantage of the continued weakness in the U.S. dollar. Bonds (F-fund) also fared well gaining 1.07% in July, and the G-fund added 0.23%.
Taking a look at the chart of the S&P 500 and we can see a lot going on, with several potential outcomes. First off, the index made a short-term higher high (marked “A” below), which allowed us to connect the higher lows, and that produced a new support line (“B”). Friday’s early selling actually tested that support line and it held nicely, triggering a nice rebound.
Charts provided courtesy of www.decisionpoint.com, analysis by TSP Talk
It is very important for that support line (“B”) to continue to hold otherwise the next downside target is the old descending trendline (“D”), which was once resistance. Resistance, once broken, tends to act as support. Conversely, support once broken, acts as resistance. So, if the support line “B” does break down, I would expect the S&P 500 to trade within the area marked “C” for a while.
If the support (line “B”) holds, look for a possible move up to the overhead rising resistance line near “A”.
It’s sounds confusing, and maybe a little silly to those who are not fans of technical analysis, but if nothing else technical analysis can be a self-fulfilling prophesy since so many people use it. For example, if a stock moves down to a support line, many technical analysts may buy expecting a bounce, and the buying in turn produces a bounce if enough investors / traders are buying.
With corporate earnings doing pretty well this past quarter, and economic data not doing quite as well, we need something to help us find the direction of this market and to me technical analysis tells the story as well as anything.
I mentioned above that August and September are historically weaker months. This chart is a few years old but it shows 56 years worth of data.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
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
After a couple of bad months in May and June, stocks came roaring back in July with the help of positive corporate earnings. Historically, August and September have been trouble months for the stock market so there is some work to do to keep the summer rally going.
For the week, the TSP funds were mixed as the C-fund slipped 0.07%, the S-fund fell 0.15%, and the I-fund added 0.65%. Bonds (F-fund) rallied 0.54% and the G-fund added 0.06%.
The TSP stock funds had a great month in July. The C and S-funds each picked up 7.0%, while the I-fund jumped 10.78%, taking advantage of the continued weakness in the U.S. dollar. Bonds (F-fund) also fared well gaining 1.07% in July, and the G-fund added 0.23%.
Taking a look at the chart of the S&P 500 and we can see a lot going on, with several potential outcomes. First off, the index made a short-term higher high (marked “A” below), which allowed us to connect the higher lows, and that produced a new support line (“B”). Friday’s early selling actually tested that support line and it held nicely, triggering a nice rebound.
Charts provided courtesy of www.decisionpoint.com, analysis by TSP Talk
It is very important for that support line (“B”) to continue to hold otherwise the next downside target is the old descending trendline (“D”), which was once resistance. Resistance, once broken, tends to act as support. Conversely, support once broken, acts as resistance. So, if the support line “B” does break down, I would expect the S&P 500 to trade within the area marked “C” for a while.
If the support (line “B”) holds, look for a possible move up to the overhead rising resistance line near “A”.
It’s sounds confusing, and maybe a little silly to those who are not fans of technical analysis, but if nothing else technical analysis can be a self-fulfilling prophesy since so many people use it. For example, if a stock moves down to a support line, many technical analysts may buy expecting a bounce, and the buying in turn produces a bounce if enough investors / traders are buying.
With corporate earnings doing pretty well this past quarter, and economic data not doing quite as well, we need something to help us find the direction of this market and to me technical analysis tells the story as well as anything.
I mentioned above that August and September are historically weaker months. This chart is a few years old but it shows 56 years worth of data.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
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
