tsptalk's Market Talk

[tsptalk]

Open question to the forum, do you see a Bull flag forming and if you do, what will it mean for stocks?

I see a loose flag. It would be better if the flag pole was more vertical / steep.

 

[tsptalk]

Despite the red we are seeing in the Dow and S&P, the Dow Transports and Nasdaq are holding onto decent gains. Good sign for tomorrow or into today's close.

 

[tsptalk]

I see some indicators telling us the time is right to be in stocks, but that overhead descending resistance on the chart is so intimidating that I decided to compromise and take 50% off the table.

The problem now is, I used up my buying IFT's for July.

 

[coolhand]

I see some indicators telling us the time is right to be in stocks, but that overhead descending resistance on the chart is so intimidating that I decided to compromise and take 50% off the table.

The problem now is, I used up my buying IFT's for July.

Sentiment is favorable (bullish) moving forward to be in stocks. I would have taken half off the table too if I wasn't limited. I've come to realize that the volatility this market is so fond of showing forces me to be very careful about selling when I get caught in an unexpected and usually violent downward move. Whipsaws are just too prolific right now. I think sentiment and historical perspective are much more important now in managing risk.

And all those TA indicators are very suspect when they become obvious. Look at the "Death Cross" for instance. We bounced off it when it became "obvious" the market was in trouble.

I know some TSPers have avoided stocks all together because of this volatility, and I can certainly understand why.

 

[tsptalk]

I agree. The excessively bearish Rydex Ratio (bullish for stocks) is the main reason I am not selling everything right now.

I am going to talk about this in Friday's commentary, but I keep turning to 2007-2008. Those lower lows look familiar and the rallies up to resistance look pretty strong, but the trend held and then everything fell apart shortly after the death cross...

There is a difference today, and that is that Rydex Ratio, which I will show in tomorrow's commentary. It (sentiment) is much more bearish right now then it was then. (bearish sentiment, meaning bullish for stocks)

One possible outcome of this battle between poor charts and bearish sentiment could just be them nullify each other causing choppy sideways action.

I will feel a lot better if the descending trend is broken.

 

[tsptalk]

I used the intraday rally to sell the rest of my long ETF positions in my IRA. I am now 100% cash in the IRA. If we break the descending trend to the upside, I'll be back in - the nice thing about an IRA over the TSP.

For the TSP I'm 100% stocks today... 50% tomorrow with no IFT's left (except moves to G).

 

[Birchtree]

Tom,

Thanx for the clarity - it's appreciated. My guestimate is you left 50% S fund.

 

[tsptalk]

Actually, went from 100% S to 50% C

 

[Birchtree]

Now that is certainly interesting - gave me a little smile. There aren't many on the MB that are partial to the C fund. Well, if you make money so will I.

 

[tsptalk]

It's kind of like the sentiment survey system... When we are in a bull market (50 over 200 ema), it uses the S fund. When in a bear market, buy signals use the C fund instead. A little more conservative.

 

[JTH]

I see some indicators telling us the time is right to be in stocks, but that overhead descending resistance on the chart is so intimidating that I decided to compromise and take 50% off the table.

The problem now is, I used up my buying IFT's for July.

Tom, It's was a tough call to make either ways.

I find myself in "somewhat" of a disagreement with you on the market's outlook as I'm now extremely disinterested & neutral. Right now I see prices declining in an orderly fashion, and I can't fathom an SPX 1120 double top as a risk/reward ratio I'm willing to entertain with my last IFT. Furthermore, I have some serious concerns with our continued declining volume and the with the recent (and still unexplained) flash crash event. These two events along with the advent of the Black Box is reshaping & skewing out technical analysis, and could be skewing up our Rydex cash chart.

It's sort of reminds me of the movie Invasion of the body snatchers in that I don't know whom to trust anymore...

 

[tsptalk]

It doesn't look like we disagree all that much. I was looking for an oversold / overly bearish rally in what I see as the start of a bear market. That overly bearish dumb money Rydex chart, along with the smart money's bullishness helped me pick up some of those gains, and only that resistance is giving me pause now (as you mentioned in your blog).

If we get back above the descending resistance, I go back to thinking the smart money is right and the dumb money is wrong, and get long again (in the IRA). But until then, I am skeptical. Options could be messing with us today and tomorrow.

The only reason I kept 50% in stocks in the TSP is because I wouldn't be able to buy back in until Aug 1 if I want / need to, and I am not yet 100% sure the breakout won't happen in the last 2 weeks in July. But the failure to close a 3rd straight day above the 200-day EMA would be a concern (if that is the case), and it won't take much more (a break of the 20-day EMA) to get me to go 100% G, but it looks like the S&P is trying to get back above it (200 ema) as I speak.

 

[tsptalk]

Pretty impressive push into the close. Perhaps we'll get an outside day?

 

[Birchtree]

If GS is off the hook - tomorrow we run the Derby. You'd be surprised how fast a bull can move.

 

[crws]

If GS is off the hook - tomorrow we run the Derby. You'd be surprised how fast a bull can move.

Just saw that! I thought it was the well news.
Double mint(ing)! :laugh:

 

[JTH]

I realize there are a lot of really smart technical traders out there who are saying this market is going to push higher. But when I weigh the risk/reward ratio under TSPs restrictions, I just don't feel it's worth the effort to jump in or stay in at these levels. In the broader picture, right now I see an established lower 1120 average high and a 1040 average low, so this is the range we have to play with, and we are already on the topside of this range.

So roughly we have a 20 point bounce to the upside & a 60 point bounce to the downside, before a test of both levels. I don't like to stick around for any type of test, as I'd rather sit it out and see if it passes or fails. I might take these odds in Vegas, if you add the pretty girls & free beer, but in the real world when I'm sober, this TSP setup doesn't appeal to me.

View attachment 9719

 

[Birchtree]

Bouncing off the 20 EMA right now at 1077.81

 

[malyla]

Bouncing off the 20 EMA right now at 1077.81

Doesn't mean much as that hasn't been a factor since the strong Feb - April run-up. Recent history shows the 20 EMA is no support at the end of the day. It's the lower BB that seems to provide support in this market and that's sitting at 1016. Deathcross (1093) is resistance right now. Risk is high. JMO

 

[JTH]

Doesn't mean much as that hasn't been a factor since the strong Feb - April run-up. Recent history shows the 20 EMA is no support at the end of the day. It's the lower BB that seems to provide support in this market and that's sitting at 1016. JMO

I agree, I'll only add that when trading, a bounce off a declining short-term moving average should carry less weight in your decision making.

 

[alevin]

Unless things change by the close, we're looking at a price-trend flip in the DeMark system today. In which case the support level I'll be watching is 1028 (base of the last price-trend flip up).