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Down, but not out
Stocks gave back most of Tuesday's gains yesterday, but it could have
been worse. The Dow lost an ugly 122-points, but it was down over
200 at one point. The reversal gives the bulls hope, but the
volatility is a concern.
For the TSP, the C, S and I-funds were down 1.05%, 0.81%% and 2.68%
respectively. The dollar rallied strongly hurting the I-fund
again. Bonds were up 0.17%. For the week, the C and S
funds are surprisingly positive, but the I-fund is down 2% because of
that rising dollar.
The S&P 500 remains in its uptrend and that is very important as we will
talk about below. The fact that it closed above those rising
support lines is a plus, and the "kangaroo tail" might be a good sign
for the rest of the week. They can be strong reversal patterns.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
Let's take a look at some other S&P 500 charts and see why the trend
is key. While we decide whether the market is healthy, if it going
to bounce off of support, or if it is going to rollover into a
correction, etc. the broken trend is the best longer-term indicator.
Sure there can be some false breaks, but if you respect the trends and
the moving averages, you can get yourself out of the market before any
real damage is done.
This 2007 - 2008 chart shows where we should have been ready to take
cover and put the defense on the field. Of course it is a lot
easier to view old charts and see the patterns, but if you have your
lines drawn in your current chart, and you see a break, don't fight it
for long. Consider selling the rallies to get out. But if
the trend remains intact you should probably ride it out. Buying
support is a great way to get in the market in an uptrend, but once it
breaks....
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
Here's a longer-term chart
(weekly). Selling the big breakdown in early 2008 may not have
gotten you out at the top, but would have sure saved your hide over the
next several months.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
And the monthly chart tells the same story but while the swings will be
wider, you can avoid much of the damage by respecting those breaks in
the charts.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
The Dow Transports were hit yesterday as well, but you can see those
appetizing kangaroo tails have produced very good buying opportunities in
the last few months.
Is this another one of those opportunities?
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
I wanted to follow up on the
dollar, which has been in that very large bull flag pattern. Bull
flags tend to break to the upside and we finally saw that yesterday.
This is the main reason that the I-fund has lagged badly in the last three
days and now that we've had the break, the 200-day EMA is the only thing
that might stand in the way of another leg higher.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
You will want to be very
careful with the I-fund if the dollar remains bullish.
There are certainly concerns out there but yesterday produced some
potentially good reversal patterns, plus the major indices remain in
uptrends above support. No need to panic yet.
Thanks for reading. We'll see you
back here tomorrow.
Tom Crowley
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