|
| Today's Commentary (Short Term Outlook) |
|
Another test for the bulls Stocks were hammered on Friday as the Dow gave back most of Thursday's large gain, and all three of the TSP stock funds did give back those gains, and more. The S&P 500 has remained above the 20-day exponential moving average (EMA), which is always a good sign for stocks in a bull market, and there is still strong support at the 50-day EMA, which coincides with the rising trend support line near 1045. So, just looking at this chart, there is no strong evidence that this trend is about to end, although the rising wedge continues to shrink and a break in one direction or the other is inevitable.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The problem for the S&P 500 is that the leader, the Dow transportation Index, has already broken below the 20-day EMA and Friday's 3.5% sell-off in the index took it down to the 50-day EMA and rising trend support line. Should the S&P 500 follow, we're looking at about a 3% drop from where it is now, but more concerning is what will happen the Transports next?  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Will it break below the 50-day EMA and the bullish trendline? If it does, it doesn't mean that the bull market is over (although it could be) but rather that the angle of this rally may need some adjusting. Still, that would probably mean some sort of correction (10% decline or more) before all is said and done. This is what I am referring to when I talk about the intermediate-term market timers. If you recall I have been saying that buy and hold investors are just holding - that's what they do at all times. Short-term market timers look to buy support and sell resistance, and intermediate-term traders look for breaks in the charts, which is what we would see if that rising trend support line breaks. But I may be getting ahead myself. If the market simply rebounds from here and the 50-day EMA and trendline hold, look for another move up to the overhead resistance. If the S&P 500 does move down to the 50-day EMA and support line, it would be one of those areas where the short-term timers are looking to buy. Then, if support breaks, they can quickly take their loss and move back to the sidelines. It's a pretty good risk / reward play if you can get it... and if you are not out of interfund transfers.
Speaking of transfers, someone told me on
Saturday that the link I had posted on Friday called,
One More TSP Transfer...Please!,
was pointing to the wrong page. Sorry about that. It has now been corrected.
1058.02 |