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Today's Commentary (Short Term Outlook)
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Some things to watch Stocks were flat to higher on Friday as the Dow closed down 9-points, but the S&P 500, and particularly small caps, closed higher. Technically, things are not very positive, but we may be due for a bounce. For the TSP, the C-fund was up 0.29%, the S-fund jumped 1.43%, and the I fund gained 0.43%, while the F-fund added 0.08%. For more on the weekly and monthly returns, please see our TSP Weekly Wrap-up. After breaking above the 50-day EMA on Monday morning of last week, the S&P 500 moved almost straight down for the rest of the week. By Friday it had broken below the 200-day EMA again, which is not what the bulls wanted to see. A rebound now could help provide a higher low, but if we start seeing the index trade down into that blue circle below, the risk of testing that 1040 support area becomes nearly inevitable, and quadruple bottoms don't tend to hold. You can say it's now or never.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Last week we mentioned several of the indices that have been able to hold their 200-day EMA, and the market leader Nasdaq was one of them, but Thursday's sell off made it another victim and Friday's modest rally could not bring it back above it.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The mid-caps and small caps are still hanging on, however...  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The dollar had bounced off of the 50-day EMA last Monday, but the 20-day EMA has been acting as resistance since. I am now starting to see a head and shoulders (H&S) pattern forming, and while they are generally bearish formations, they are more bearish during downtrends.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk When you start seeing smaller head and shoulder patterns within larger head and shoulder patterns, that's when things really start to look bad. It's a too early to say, but the S&P 500 is actually in the process of forming one of those smaller H&S's within a larger one, so this is something I will be watching closely.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk That would be a very ominous development that would be punctuated by a break of 1040. But as you can see, even if it does happen, a move back toward 1100 could be very possible at some point. Last week's TSP Talk Sentiment Survey came in at 34% bullish, 54% bearish for a 0.63 to 1 bulls to bears ratio, which is a buy signal for this week. Thanks for reading. We'll see you back here tomorrow! Tom Crowley |