TSP Talk - Thrift Savings Plan Strategies

Market Comments

May 6, 2010

Current TSP Share Prices

Today's Commentary (Short Term Outlook)

More damage

Stocks opened lower and could not hold on to the midday rebound, leaving the Dow down 59-points on the day. The dollar was strong making things tough on the stock funds.

For the TSP, the C-fund fell 0.63%, the S-fund lost 1.44%, and the I-fund shed another 1.57%, while the F-fund added 0.20%.

The S&P 500 fell through the 50-day EMA. One day is not a deal breaker, but it is a sharp stick in the eye for the bulls. Much of the disappointment came after a triple digit loss at the open turned into a gain by lunchtime, only to see the rebound slip away again. The dip buyers tried again late in the day, but did not have enough to avoid more losses.


There is a "phantom" support line (blue dashed line below) that may or may not actually provide support, but the selling did stop at that point during the day. But no matter how you slice it, a break of the 50-day EMA is an attention grabber, and is something to be concerned about.


                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The daily put/call ratios (not the moving average) showed some sharp moves from both the smart and dumb money, and of course it was in different directions.

When the CBOE put/call ratio (dumb) has hit 1.20 on the daily chart during this bull market, the buyers have stepped up - or maybe the sellers ran out of gas.

The Equity put/call ratio (dumb) is down sharply but not quite at the extreme we saw earlier this year. 0.80 seems to be the area to watch.

                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

And the OEX put/call ratio of the smart money is up to 0.76, nearing the 0.50 level that is about where it normally peaks (most optimistic for smart money).

Translation: The dumb money is getting a little panicky while the smart money is lightening up on the defensive put positions. This could be an early sign that a relief rally is near.
The yield on the 10-year T-note has continues to fall on the news out of Europe. Yesterday saw some technical damage as it opened below, and remained below the 200-day EMA, helping bond prices and the F-fund to continue to rally. It also broke below the descending trading channel. This is another sign of some panic activity as investors rushed to safety.


                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

For the same reason, the dollar has been shooting higher as the Euro declines. This is affecting the I-fund negatively and while it is bullish for the dollar, it is getting a little stretched to the upside.

                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Investors are getting nervous and they probably should be. I expect some sort of relief rally in the coming days, but the question is, should it be bought or sold? In January, the break in the 50-day EMA took a couple of weeks to work itself out. The concern is that the support broken on the way down, could be the resistance on any rebound.

To make things more interesting, today is the United Kingdom's general election, tomorrow is the jobs report, and more European bailout decisions are on the way.

Thanks for reading. We'll see you back here tomorrow.

Tom Crowley

TSP Talk is in no way affiliated with the U.S. government, or military TSP Thrift Savings Plan, tsp.gov, or any other government agency. TSP Talk does not guarantee the accuracy or completeness of this report, nor does TSPtalk.com assume any liability for any loss that may result from reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice and are for general information only. The information contained on this website is for educational purposes only and not intended to be recommendations, and may not be published, broadcast, rewritten or otherwise distributed without prior written consent from TSPtalk.com.