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Market Comments

July 19, 2011

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Today's Commentary

Signs of a breakdown showing, but...

As the overnight futures indicated, stocks opened sharply lower yesterday morning, and while there was no immediate bounce off of the emotional Monday morning gap down, buyers stepped in with a modest push higher in the afternoon.

The Dow closed down 95-points, but if its any consolation, that was about 90-points off the intraday low.


For the TSP, the C-fund was down 0.81% yesterday, the S-fund lost 1.45%, the I-fund fell 1.68% and the F-fund (bonds) slipped 0.07%.

The S&P 500 temporarily dipped below one descending support level, but managed to close above it after the midday reversal. It also seemed to find support at the April low.


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

The Dow Transports, the index we consider the leader, all but broke down yesterday. This is not a good sign, but after being down 6 of the last 7 days we'd expect some kind of relief rally. The question is, will it be a dead cat bounce that is destined to roll back over, or a new higher low?


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

There are a few charts I am concerned about, but let me get the good one out first. The Nasdaq Index, and in particular the Nasdaq 100 which comprises the largest technical stocks in the U.S., are holding up better than most indices. The Nasdaq is another leading index, after the Transports so this complicates things a bit.


                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
And while the big tech companies seem to be holding up, the semiconductor sector is breaking down.

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

As are the bank stocks...


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

And the housing Index isn't far behind...


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

With so many indices starting to break down, and others barely above support, the rest of this week is very important for the intermediate-term, in my opinion. We could see an all out breakdown, or we could see a sharp "V" shaped rebound in this critical area. All we can do is wait.

IBM reported a good quarterly earnings report after the close yesterday and we have modestly higher prices in the overnight futures. The reports will really start to roll in this week and if the early reports are any indication of what is to follow, it should be a pretty good earnings season.

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

Tom Crowley

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