TSP Talk Weekly Wrap Up

10/01/11

Testing the lows... again

The volatility continued on Wall Street this past week as we saw wild swings in both directions culminating in a steep sell-off on Friday that took most of the major indices into the red for the week.

For the TSP funds, the C-fund lost 0.41% last week, the S-fund dropped 1.69%, the I-fund was up 1.65%, while the F-fund (bonds) fell 0.38%, and the G-fund was up 0.04%.

For the month the C-fund ended down 7.03% in September, the S-fund dropped 10.73%, the I-fund fell 10.55%, the F-fund was up 0.73%, and the G-fund gained 0.16%.

The S&P 500 continues to play out a typical bear flag (red) and head and shoulders (H&S, in blue) patterns. We saw a break down below the flag and the neckline of the H&S and then a relief rally back up to the old support lines, which are now acting as resistance.

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

Unfortunately, the next "typical" behavior would be to test the old lows, and probably break below them. The good news is that it should produce a pretty good short (or even long) term buying opportunity.

Back in August we talked about how these consolidation periods that follow sharp declines can last for several week or months, and here we are still waiting for a break down, or a rally.

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

I think this could be resolved in October, but how bad things get before they get better remains to be seen so we don't want to be too aggressive yet. Look for high levels of panic like selling, and a capitulation from the bulls ("I give up!") before a real rebound can begin.

Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.

Tom Crowley
www.tsptalk.com
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[RealMoneyIssues]

I think this could be resolved in October, but how bad things get before they get better remains to be seen so we don't want to be too aggressive yet. Look for high levels of panic like selling, and a capitulation from the bulls ("I give up!") before a real rebound can begin.

Unfortunately, what is the market going to rally on? Good economic reports :notrust: , good news out of Europe , or some analyst saying better days are ahead :worried: ?

Until some material changes are made to make our economy grow, I am a bear... Just my 2 cents...

 

[Sensei]

Unfortunately, what is the market going to rally on?
...

Seems to me, the market moves and we explain why afterwards. In other words, we won't be able to answer that question until after it's happened. That's why this is so damn hard.

 

[tsptalk]

Unfortunately, what is the market going to rally on? Good economic reports :notrust: , good news out of Europe , or some analyst saying better days are ahead :worried: ?

Until some material changes are made to make our economy grow, I am a bear... Just my 2 cents...

Earnings, maybe? As sensei said, the market will likely move, then we'll get the news.

We are in a bear market, but those bear market rallies can give you a good annual return in a few weeks - if you catch them right.

Also, you are certainly not alone in your negative sentiment, which makes a snap-back rally in the next couple of weeks a good possibility. The market will always try to get us to lean the wrong way.