10/12/12
Stocks opened higher yesterday after a much better than expected initial jobless claims report. But the excitement passed by late morning and the Dow closed down 18-points, which was 102-points off of its morning high.
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[TD="width: 241"]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 149"]
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[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] 0.0036%[/TD]
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[TD="align: right"] F-fund:[/TD]
[TD="align: right"] 0.11%[/TD]
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[TD="align: right"] C-fund:[/TD]
[TD="align: right"] 0.04%[/TD]
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[TD="align: right"] S-fund:[/TD]
[TD="align: right"] 0.46%[/TD]
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[TD="align: right"] I-fund:[/TD]
[TD="align: right"] 0.59%[/TD]
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[TD="align: right"] [/TD]
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The estimates for the initial jobless claims were for 370,000 and it came in at 339,000. It appeared to be a very positive report with 31,000 fewer folks filing initial jobless claims, but it was later disclosed that California did not file their data so it was not included in the report. I guess that happens once in a while, but with the election so close, every economic indicator is under a microscope.
The S&P 500 closed at its low of the day but managed to hold onto it's key support levels again. 1425 - 1430 is being watched by many investors as a line in the sand as it is where two support trend lines meet with the 50-day EMA. If I had to guess, I would say the S&P 500 will break below it, get a few investors panicking, and it will be back above it quickly. Just a hunch based on the fact that the market likes to trick us whenever possible.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq is in a new down trend and that 50-day EMA did act as resistance yesterday. The battle here is between that 50-day EMA and the support of the bottom of the new descending trading channel.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transportation Index put in a second negative reversal day just below the 200-day EMA.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We knew the Transport Index had run out of steam on its first attempt to move above the 200-day EMA, but unlike the last two peaks, it is not heading straight down. It is doing some churning here - perhaps refueling for another attempt at a move back above the 200-day EMA. The chart doesn't look very good so a positive push higher is needed quickly, to repair the technical damage that has been done to it. An argument could be made that it has formed a short-term bull flag in October.
I don't watch the VIX too closely but when it hits support and resistance I take a look. During the rally off of the June low, the VIX has tested the top of its Bollinger Bands 3 times. Each time we saw at least a temporary bounce higher so this looks good for the next few days.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Like I said, another quick push lower may scare investors who are watching the support on the S&P 500 and that fear may be just what the market needs to trigger a snap back rally. Investors already reversed their bullish sentiment from last week as the TSP Talk Sentiment Survey is moving back into a buy signal for next week after just one week in sell mode.
The TSP Talk Sentiment Survey came in at 45% bulls, 45% bears, for a bulls to bears ratio of 1.00 to 1. That is a Buy Signal which means the system will move back to a 100% S fund allocation for next week after one week in the G-fund.
I'm not super bullish myself, but I think a little relief rally is possible for next week. But then we head into that weak part of October the week after that.
Thanks for reading! Have a great weekend!
Tom Crowley
Posted daily at TSP Talk Market Commentary
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