Expect bearish results in a bear market
Stocks went on a wild ride last week as new economic data tossed the indices around during the mostly light volume, late summer trading.
We saw initial jobless claims come in slightly better than expected. There was a downward revision to the 2nd quarter GDP, but the revision was slightly higher than expected. Consumer sentiment came in lower than expected, and we saw some disappointing numbers from the housing industry – hence the volatility.
On Friday, stocks rallied sharply as once again the Federal Reserve stepped in to assure us that they will do what it takes to help. The last time the Fed did that stocks rallied, but it was short-lived.
It was another mixed week for the TSP as the C-fund lost 0.62%, the S-fund gained 0.17%, and the I-fund fell 0.17%. Bonds (F-fund) slipped 0.11% and the G-fund picked up 0.05%.
For the month, the C-fund is down 3.15%, the S-fund is off 3.83%, and the I-fund has dropped 3.00%. Bonds and the F-fund are up 0.72% in August, and the G-fund is up 0.19%.
The S&P 500 experienced some serious technical damage over the last few weeks, and now finds itself in a short, and longer-term, downtrend. But like most indices, it had become quite oversold and was due for a bounce. Markets don’t go straight up or straight down and after exhaling for some time, Friday’s rally was a reflexive inhale and the Fed’s reassuring statements helped produce what was probably going to happen anyway.
The problem is it has its work cut out for it to keep the rally going. There is resistance just overhead, and also the Exponential Moving Averages (EMAs) could also give the index problems should the rally move through the first wave of resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
As you can see above, the S&P 500 is trading below the 20, 50, and 200-day EMA’s, the 50-day EMA is below the 200-day EMA, and the 20-day EMA is below both the 50 and 200-day EMA. This is a pretty good indication that we are in a bear market, and when the market is in a bear market, expect negative outcomes. When rallies happen, it is an opportunity to sell if you own stocks. You buy dips in a bull market, and sell rallies in a bear market.
The chart of the S&P 500 is not painting a very bullish picture at the moment, and this small chart above is just showing a small portion of the story. Please check in daily with our daily market commentary where we will look more closely at the day to day developments of the charts and indicators.
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
Stocks went on a wild ride last week as new economic data tossed the indices around during the mostly light volume, late summer trading.
We saw initial jobless claims come in slightly better than expected. There was a downward revision to the 2nd quarter GDP, but the revision was slightly higher than expected. Consumer sentiment came in lower than expected, and we saw some disappointing numbers from the housing industry – hence the volatility.
On Friday, stocks rallied sharply as once again the Federal Reserve stepped in to assure us that they will do what it takes to help. The last time the Fed did that stocks rallied, but it was short-lived.
It was another mixed week for the TSP as the C-fund lost 0.62%, the S-fund gained 0.17%, and the I-fund fell 0.17%. Bonds (F-fund) slipped 0.11% and the G-fund picked up 0.05%.
For the month, the C-fund is down 3.15%, the S-fund is off 3.83%, and the I-fund has dropped 3.00%. Bonds and the F-fund are up 0.72% in August, and the G-fund is up 0.19%.
The S&P 500 experienced some serious technical damage over the last few weeks, and now finds itself in a short, and longer-term, downtrend. But like most indices, it had become quite oversold and was due for a bounce. Markets don’t go straight up or straight down and after exhaling for some time, Friday’s rally was a reflexive inhale and the Fed’s reassuring statements helped produce what was probably going to happen anyway.
The problem is it has its work cut out for it to keep the rally going. There is resistance just overhead, and also the Exponential Moving Averages (EMAs) could also give the index problems should the rally move through the first wave of resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
As you can see above, the S&P 500 is trading below the 20, 50, and 200-day EMA’s, the 50-day EMA is below the 200-day EMA, and the 20-day EMA is below both the 50 and 200-day EMA. This is a pretty good indication that we are in a bear market, and when the market is in a bear market, expect negative outcomes. When rallies happen, it is an opportunity to sell if you own stocks. You buy dips in a bull market, and sell rallies in a bear market.
The chart of the S&P 500 is not painting a very bullish picture at the moment, and this small chart above is just showing a small portion of the story. Please check in daily with our daily market commentary where we will look more closely at the day to day developments of the charts and indicators.
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
