Market Comments June 24, 2009  Current TSP Share Prices

Today's Comments (Short Term Outlook)                            Printer  friendly

Technical picture may have taken turn for the worst Stocks were largely mixed yesterday with the Dow being down slightly, the S&P 500 up a couple, the small caps of the S-fund down, and the I-fund up big as the dollar slid sharply.  The F-fund (bonds) was up modestly. The S&P 500 is still below the 20 and 50-day exponential moving averages (EMA) and while it has been failing to get above the 200-day EMA, it had managed to move above the 200-day simple moving average (SMA); something many technicians use.  But it is now back below the 200-day SMA, and that has not been a good omen for stocks in the past.  Also, the slop of the 200-day SMA is still down, not exactly what the bulls are looking for.                Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The fact that the S&P is now trading below the 200-day SMA after having moved above it a few weeks ago, may be a bad sign for the intermediate-term.  The following is from our friends at SentimenTrader.com:   Now that the 200-day average has "failed" by the S&P crossing back below it yesterday, let's revisit it.  Let's go back to 1928 and look for any other time the S&P crossed above its downward-sloping 200-day average, held above it for at least five days and hit at least a one-month high, then fell back below.   Since the late 1920's, there were five other occurrences:                                         Chart provided courtesy of www.sentimentrader.com ...In every case but one, the S&P ultimately went on to violate the low that preceded the rally above the 200-day average.  And that one exception, in 1947, we saw the S&P do a "full" re-test of the low, holding just a few cents above the low prior to the big rally above the 200-day average.   With only five precedents, we obviously don't have enough information to draw a statistically valid conclusion.  But these analogs do help show what's possible, even what's likely, under somewhat similar technical circumstances.  -- Courtesy of www.sentimentrader.com One of the market leaders, the Nasdaq, continues to trade in a much more positive technical manner as this recent pullback has found support at both the 50-day and 200-day EMA's.  This is promising so far, and something we saw in the S&P 500 at the start of the 2003 bull market.  If it can hold, it would be an encouraging sign for the S&P 500.              Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk On the other hand, the economically sensitive Dow Transportation Index, our other market leader, continues to struggle and is now back below the 20, 50 and 200-day EMA's.  The trend remains down and the PMO is on a sell signal.                 Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk That 3000 level will be very important for not only the Dow Transports, but for the entire stock market, in my opinion.   While we saw some positive signs over the last several weeks / months, we are starting to see some cracks in the technical picture.  The bear market may be getting ready to resume, but the bulls have not given up completely yet.  Watch the support levels on the three index charts above for clues as to whether this pullback is temporary, or the start of something more sinister. That's all for today.  Thanks for reading!  See you tomorrow!