Trading channels
Stocks moved mostly sideway last week leading up to this week’s important Election Day and FOMC meeting. The bears might say that the rally has run out of steam while the bulls would look at this as a consolidation period before the next move higher. Which is it?
For the week, the TSP funds were mixed as the C-fund added 0.04%, the S-fund gained 0.65%, and the I-fund lost 0.42% as we saw some strength in the dollar. Bonds (F-fund) were down slightly at -0.03%, and the G-fund picked up 0.05%.
For the month of October, we saw gains in all of the TSP funds with the S-fund leading the way at +4.48%, the C-fund was next at +3.80%, and the I-fund picked up 3.63%. The F-fund (bonds) was up 0.36% in October and the G-fund added 0.18%.
The market has come a long way in a short period of time and might need a rest, but the market is also entering the two strongest months of the year historically, and also the stronger 6-month period from November to April. You may have heard the phrase, “Sell in May and go away.” Well the other half of that strategy is to buy in November and hold until May. That strategy does have a very good long-term record, but of course it does not work every year.
The S&P 500 has been trading in a very tight trading range (blue box below) for the last few weeks and it is now testing two separate parallel trading channels – one being a short-term trend (thin red trend lines), and another a potential long-term trend (thick red trend lines). The shorter-term trend is being tested on the lower end looking for support, and the longer-term trend is testing the upper end, which may act as resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Last Monday’s big early rally took the S&P 500 up to the upper end of that long-term parallel channel and the market quickly retreated. Perhaps this week’s election and the Fed’s FOMC meeting, which will likely include more information on quantitative easing (QE 2), will give us more answers as to which trend is going to hold.
Should we see a break in the shorter-term trend and the 20-day EMA (currently 1171), the bears may gain the upper hand and we may have to prepare for a market pullback back into the center or lower end of the longer-term channel – despite entering a strong seasonal period for stocks.
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 moved mostly sideway last week leading up to this week’s important Election Day and FOMC meeting. The bears might say that the rally has run out of steam while the bulls would look at this as a consolidation period before the next move higher. Which is it?
For the week, the TSP funds were mixed as the C-fund added 0.04%, the S-fund gained 0.65%, and the I-fund lost 0.42% as we saw some strength in the dollar. Bonds (F-fund) were down slightly at -0.03%, and the G-fund picked up 0.05%.
For the month of October, we saw gains in all of the TSP funds with the S-fund leading the way at +4.48%, the C-fund was next at +3.80%, and the I-fund picked up 3.63%. The F-fund (bonds) was up 0.36% in October and the G-fund added 0.18%.
The market has come a long way in a short period of time and might need a rest, but the market is also entering the two strongest months of the year historically, and also the stronger 6-month period from November to April. You may have heard the phrase, “Sell in May and go away.” Well the other half of that strategy is to buy in November and hold until May. That strategy does have a very good long-term record, but of course it does not work every year.
The S&P 500 has been trading in a very tight trading range (blue box below) for the last few weeks and it is now testing two separate parallel trading channels – one being a short-term trend (thin red trend lines), and another a potential long-term trend (thick red trend lines). The shorter-term trend is being tested on the lower end looking for support, and the longer-term trend is testing the upper end, which may act as resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Last Monday’s big early rally took the S&P 500 up to the upper end of that long-term parallel channel and the market quickly retreated. Perhaps this week’s election and the Fed’s FOMC meeting, which will likely include more information on quantitative easing (QE 2), will give us more answers as to which trend is going to hold.
Should we see a break in the shorter-term trend and the 20-day EMA (currently 1171), the bears may gain the upper hand and we may have to prepare for a market pullback back into the center or lower end of the longer-term channel – despite entering a strong seasonal period for stocks.
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
