Bulls keeping the pressure on
After starting out poorly last week, stocks were able to rally the rest of the week and regain most, if not all, of those losses from Tuesday. The surprise to me has been the lack of volume – something we had expected to pick up after the holiday, but it was actually lighter this past week, than the prior pre-Labor Day Weekend holiday summer week. Where are the big investors?
For the TSP, the C-fund overcame early losses to close the week up 0.49%. The S-fund also came from a long way back, but still ended the week in negative territory at -.061%. And the I-fund picked up 0.36%. Bonds (F-fund) fell 0.28% and the G-fund added 0.04%.
For the month, the C-fund is still up an impressive 5.8%, the S-fund is equally positive at +5.67%, and the I-fund is up 5.20%. Bonds and the F-fund are down 0.85% so far in September, and the G-fund is up 0.06%.
There is a lot going on in this chart of the S&P 500. After breaking above the 200-day EMA the prior week, the index was able to breakout above the descending longer-term trading channel. However, it has only closed above it for one or two days - depending on how finely you draw the line - and with the volume almost nonexistent, it is a little tough to trust the action.
Charts provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The 200-day SMA (simple moving average) is just overhead and I although I am more of a fan of the EMA (exponential moving average), many traders and investors look at the 200-day SMA and it can act as support or resistance. The SMA simply adds up the prior 200 day’s closing prices and divides by 200, where the EMA puts more weight on the recent action.
Except for a temporary break in early July, the S&P has been trading in a range of 1045 and 1130 since May, so until one side breaks, we might expect the action to continue to bounce around within this range.
The 50-day EMA (purple line) is still below the 200-day EMA (blue line) so officially, we are still in a bear market according to the rules I use, but you can see that the two have been playing a little jump rope over the last two months, whipsawing our bull / bear market signals.
I have not shown it in today’s chart, but we have talked about the S&P being in a large (over 10-months) head and shoulders pattern, which is bearish and if it breaks, would have a downside target under 900, so I am concerned that this recent action is setting a trap for longer-term investors who are getting more comfortable buying stocks and as we’ve said, with the volume being very light it is not the big investors who are being sucked in right now. Eventually volume will pick up and we will see if the larger investment firms and money managers are looking to buy or sell.
Either way, I am not reluctant to buy should the opportunities come our way (we had a good one on September 1 but I missed it as I was out of interfund transfers on August 31) but my eye is still on the longer-term bearish pattern of the head and shoulders pattern so I will be doing more hit and run trades rather than buying and holding. And as our slogan goes, “Friends don’t let friends buy and hold.”
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 starting out poorly last week, stocks were able to rally the rest of the week and regain most, if not all, of those losses from Tuesday. The surprise to me has been the lack of volume – something we had expected to pick up after the holiday, but it was actually lighter this past week, than the prior pre-Labor Day Weekend holiday summer week. Where are the big investors?
For the TSP, the C-fund overcame early losses to close the week up 0.49%. The S-fund also came from a long way back, but still ended the week in negative territory at -.061%. And the I-fund picked up 0.36%. Bonds (F-fund) fell 0.28% and the G-fund added 0.04%.
For the month, the C-fund is still up an impressive 5.8%, the S-fund is equally positive at +5.67%, and the I-fund is up 5.20%. Bonds and the F-fund are down 0.85% so far in September, and the G-fund is up 0.06%.
There is a lot going on in this chart of the S&P 500. After breaking above the 200-day EMA the prior week, the index was able to breakout above the descending longer-term trading channel. However, it has only closed above it for one or two days - depending on how finely you draw the line - and with the volume almost nonexistent, it is a little tough to trust the action.
Charts provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The 200-day SMA (simple moving average) is just overhead and I although I am more of a fan of the EMA (exponential moving average), many traders and investors look at the 200-day SMA and it can act as support or resistance. The SMA simply adds up the prior 200 day’s closing prices and divides by 200, where the EMA puts more weight on the recent action.
Except for a temporary break in early July, the S&P has been trading in a range of 1045 and 1130 since May, so until one side breaks, we might expect the action to continue to bounce around within this range.
The 50-day EMA (purple line) is still below the 200-day EMA (blue line) so officially, we are still in a bear market according to the rules I use, but you can see that the two have been playing a little jump rope over the last two months, whipsawing our bull / bear market signals.
I have not shown it in today’s chart, but we have talked about the S&P being in a large (over 10-months) head and shoulders pattern, which is bearish and if it breaks, would have a downside target under 900, so I am concerned that this recent action is setting a trap for longer-term investors who are getting more comfortable buying stocks and as we’ve said, with the volume being very light it is not the big investors who are being sucked in right now. Eventually volume will pick up and we will see if the larger investment firms and money managers are looking to buy or sell.
Either way, I am not reluctant to buy should the opportunities come our way (we had a good one on September 1 but I missed it as I was out of interfund transfers on August 31) but my eye is still on the longer-term bearish pattern of the head and shoulders pattern so I will be doing more hit and run trades rather than buying and holding. And as our slogan goes, “Friends don’t let friends buy and hold.”
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
