|
| Today's Commentary (Short Term Outlook) |
|
Now, or support disappears Stocks made feeble attempts to rally yesterday, but by the afternoon, the bulls had given up and the bears were in control. By the close the Dow lost another 115-points and the mood is getting quite gloomy out there.  For the TSP, the C-fund fell 1.35%, the S-fund was dropped another 2.27%, and the I fund lost 1.36%, while the F-fund ticked up 0.01%. The S&P 500 fell below, and closed below, the May 6th low. It is now about to test what appears to be the last level of any significant support. This is a dangerous situation that needs to be fixed quickly, or things could start to accelerate to the downside, similar to what happened during 2007 - 2008.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk In early 2008, the S&P started to test a triple bottom support line, and if it failed, there was little support for the next 150 or so S&P points. It failed, and the S&P eventually moved down those 150-points. Then in September there was another test of support, and it was the last support to be found for quite a way down, and the rest is history...  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk I'm getting quite concerned that the support near 1040 could break and there will be little to catch the fall until the S&P 500 drops below 900. And what is the market leader, Dow Transportation Index, doing?  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Yikes! The 200-day EMA has been broken, and the next support area is about 7% below the current levels. I am very aware of the fact that my sentiment is getting quite pessimistic and that tends to be a sign that a buying opportunity is close at hand (high fear = good buying opportunity). But as I mentioned yesterday, if you decide to get out of stocks around this level (or when support breaks), you will always get another opportunity to buy down the road, even if it's just a few days down the road - assuming you have some transfers left in June. I don't have much more to add. Yesterday I went over why we could see a bounce in the short-term so that is still in play, but that precipice is looking over quite a drop, and your tolerance for risk may be reaching the pucker stage. Thanks for reading. We'll see you tomorrow. Tom Crowley |