07/28/11
Stocks sold off yesterday as we moved another day closer to the debt ceiling deadline. There was some disappointing economic data as well but clearly all eyes are still on the situation in Washington. The Dow lost 199-points.
For the TSP, the C-fund dropped 2.03% yesterday, the S-fund plummeted 2.77%, the I-fund fell 2.21%, and even the F-fund (bonds) gave up 0.15%, which is interesting. You might expect investors to move into bonds with the big sell-off in stocks.
In just a day or two, the S&P 500 went from looking very good, to looking like it needs to turn around quickly. You can see the short-term support line has been broken, and surprisingly the 20 and 50-day EMA's were taken out rather easily on the first try.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
A longer-term look shows that the index remains in the middle of the large trading range between about 1250 and 1350, and it is still above the 1295 level which is where the shoulders of the inverted head and shoulders patterns have been finding support.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The market leading Dow Transportation Index is not looking very good at the moment. Like the S&P 500, it closed below the 20 and 50-day EMA's but it has now made a lower low, which creates a new short-tern downtrend.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Notice how the volume has increased as the index has fallen. That either means the big money is starting to sell, or that we are closer to a capitulation and reversal. The very weak durable goods report yesterday had a lot to do with yesterday's sell off in the Trannies so we'll have to see if it can recover today.
The NYSE overbought/oversold indicator is now south of the -500 level. In a bull market we would expect some kind of rebound off of a reading this low. But with the emotional selling caused by uncertainty, this indicator can go lower as we saw in 2008-2009, but that was a bear market.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
One interesting observation is that bonds were down yesterday while stocks sold off. Normally investors look to bonds when stocks fall.
When bond prices go down, bond yields go up. While yields were slightly higher yesterday, the yield on the 10-year T-Note is surprisingly still below 3% (currently 2.98%). Why is that meaningful?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Everyone is currently concerned with our country going into default, although many experts realize that it is highly unlikely, and the bond market does not seem to think it is likely either. If the USA was going to default on its debt, you would see bond yields soar. Take a look at the 10-year bond yield of Greece.
Chart source: http://www.tradingeconomics.com/greece/government-bond-yield
Now, that is a country, and a bond market, that is concerned with default.
The stocks charts are starting to break down some here and much of that has to do with uncertainty. I think we need to give it a few days before giving up on this bull market. Some kind of deal out of Washington would be helpful, but both parties seem to be more worried about re-elections than fixing the problem so I don't know how optimistic we can really be.
Thanks for reading! Well see you back here tomorrow.
Stocks sold off yesterday as we moved another day closer to the debt ceiling deadline. There was some disappointing economic data as well but clearly all eyes are still on the situation in Washington. The Dow lost 199-points.
For the TSP, the C-fund dropped 2.03% yesterday, the S-fund plummeted 2.77%, the I-fund fell 2.21%, and even the F-fund (bonds) gave up 0.15%, which is interesting. You might expect investors to move into bonds with the big sell-off in stocks.
In just a day or two, the S&P 500 went from looking very good, to looking like it needs to turn around quickly. You can see the short-term support line has been broken, and surprisingly the 20 and 50-day EMA's were taken out rather easily on the first try.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
A longer-term look shows that the index remains in the middle of the large trading range between about 1250 and 1350, and it is still above the 1295 level which is where the shoulders of the inverted head and shoulders patterns have been finding support.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The market leading Dow Transportation Index is not looking very good at the moment. Like the S&P 500, it closed below the 20 and 50-day EMA's but it has now made a lower low, which creates a new short-tern downtrend.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Notice how the volume has increased as the index has fallen. That either means the big money is starting to sell, or that we are closer to a capitulation and reversal. The very weak durable goods report yesterday had a lot to do with yesterday's sell off in the Trannies so we'll have to see if it can recover today.
The NYSE overbought/oversold indicator is now south of the -500 level. In a bull market we would expect some kind of rebound off of a reading this low. But with the emotional selling caused by uncertainty, this indicator can go lower as we saw in 2008-2009, but that was a bear market.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
One interesting observation is that bonds were down yesterday while stocks sold off. Normally investors look to bonds when stocks fall.
When bond prices go down, bond yields go up. While yields were slightly higher yesterday, the yield on the 10-year T-Note is surprisingly still below 3% (currently 2.98%). Why is that meaningful?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Everyone is currently concerned with our country going into default, although many experts realize that it is highly unlikely, and the bond market does not seem to think it is likely either. If the USA was going to default on its debt, you would see bond yields soar. Take a look at the 10-year bond yield of Greece.
Chart source: http://www.tradingeconomics.com/greece/government-bond-yield
Now, that is a country, and a bond market, that is concerned with default.
The stocks charts are starting to break down some here and much of that has to do with uncertainty. I think we need to give it a few days before giving up on this bull market. Some kind of deal out of Washington would be helpful, but both parties seem to be more worried about re-elections than fixing the problem so I don't know how optimistic we can really be.
Thanks for reading! Well see you back here tomorrow.
Tom Crowley
