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| Today's Commentary (Short Term Outlook) |
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The bounce at support, but
can it last? Stocks bounced around much of the day yesterday, but a late rally pushed the indices nicely higher, closing at their highs of the day. The good news is, the Dow and S&P 500 were up over 1% each. The bad news is the Nasdaq closed in negative territory.  For the TSP, the C-fund picked up 1.11%, the S-fund managed a 0.17% gain, and the I fund was up 1.21%, while the F-fund added 0.05%. The S&P 500 fell early but bounced off of the support line formed by the February low and the low in May. This was a must for the bulls, as we talked yesterday about how little support there is below if 1040 is taken out.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk We have been long overdue for some kind of oversold bounce, and while this could be exactly what the bulls were looking for - a double bottom - overhead resistance is strong and the chart is in rough shape. You might notice that the May 6th low near 1065, could be the first test of any rally. Old support, once broken, can turn into resistance on the way back up. I have mentioned the ARMS Index a few times this year as that 1.50 level on the 10-day moving average (bottom chart) has been a very good buy signal over the last year, but last Friday's 323 loss in the Dow took that indicator to levels rarely seen.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The daily reading hit 13.0 that day, and it took the 10-day moving average all the way over 2.50, another huge reading. What this was telling us was that a bounce was due (and we got at least the start yesterday) but if you notice that other high (high in number, low on the chart) readings did produce bounces, but also came before more severe damage was done. A quick look at the leaders shows the Dow Transports at the bottom of a descending wedge (possibly bullish) and the Nasdaq holding support, despite the negative close yesterday.  
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Again, this could indicate a rebound is coming, but with both trading below their 200-day EMA, any rebound could be short-lived. As we have been saying, those who don't mind rolling the dice could make a take a chance looking for an oversold rally, but the charts are trying to tell us to use caution until things look better. Thanks for reading. We'll see you tomorrow. Tom Crowley |