Once again the early money was lured into the market as the indices looked good and moved up during the first hour of trading. And once again they were trapped.
Chart source http://finance.yahoo.com
By the end of the day we likely had a mixture of smart money selling and the start of the emotional money, panicking.
Now the question is, when does the bleeding stop? It wouldn't be a surprise to see the panic selling kick it up a notch as the last of the would be sellers, start to bail. I wonder if TSP is attempting to do a little damage control themselves. It's a conspiracy theory but here it is 1 AM ET as I write this and tsp.gov site has still not updated the share prices or our account balances. This is about 5 or 6 hours after the normal time. Are they protecting federal employees from panicking? OK, that's a stretch but I don't know why the share prices haven't been updated. Are there storms in New Orleans perhaps?
Let's look at the S&P 500. It found a bit of support directly on the support line from late January (dashed line) which was also the breakout point in November. The next support area is the 200 day exponential moving average (EMA). Exponential just means that the recent action has more weight in the calculation of the moving average as opposed to a simple moving average which takes everyday as equal weighting.
Chart provided courtesy of www.decisionpoint.com
After the 200 day EMA, comes the rising bullish trend line which starts at the low in August of last year. If you look at a longer term weekly chart, that trend line actually goes back to a low made in early 2003. A break below those areas, about where I put that red "X", would certainly stir up a panic. We may not go that low but that type of sell off, another 20 points or 1.7%, would probably do the trick.
Again I don't want to sound too bearish because I'm about ready to buy, but don't forget that 1994 chart I put up a couple of times. These are the types of waterfall like declines we could face. Not likely, but possible. Coincidentally, the decline occurred during the last week of March that year.
Chart provided courtesy of www.decisionpoint.com
That's all for today. Currently 100% G fund. I will be looking to get back into stocks within the next few days. As always I will send out an email alert and post it on the message board. See you tomorrow.
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