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| Today's Commentary (Short Term Outlook) |
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Breakdown For much of the day, the market acted like it was a typical holiday week trading day. Then, with about an hour to go, the sellers stepped up and the Dow ended the day with nearly a 100-point loss.  For the TSP, the C-fund lost 1.00%, the S-fund dropped 0.87%, and the I fund fell 0.58%. The F-fund (bonds) added 0.01%. The S&P 500 has now broken the neckline of the head and shoulders pattern. Combining this with the other evidence - trading below the 20, 50, and 200-day EMA, and the 50-day EMA moving below the 200-day Simple Moving Average, and it is not a pretty picture. What kind of a head and shoulder pattern will we get?  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk When an index breaks a moving average or a trendline, I usually like to give it at least three days to correct itself, so I am not sure which H&S patter will follow. There are two common H&S results. The first one is the breakdown, then a rally back to the neckline with the rally generally lighter volume than the volume during the breakdown. The neckline tends to act as resistance and the downside continues...  The other is a test of the middle the head before the downside continues, but if that is going to happen this time, the S&P needs to get back above the neckline in a hurry.  Not surprisingly, the NYSE is oversold, although not near the extreme levels we saw in May. In a market that has little going for it, any move back to the -0- level is usually a time to play defense, and anything up to +500 is overbought. Hitting +1000 proves much more difficult in a bear market than in a bull market.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Sentiment is obviously getting pessimistic but we will find out just how much with today's survey. The 50-day EMA (1107) is below the 200-day SMA (1112), but the Sentiment Survey System won't move to bear market rules until he 50-day EMA crosses below the 200-day EMA (1098). The consensus estimates for Friday's June jobs report is for a loss of 100,000 jobs and an unemployment rate of 9.8%. If you remember, the May report saw a gain of 431,000 jobs and a 9.7% unemployment rate, but the concern was that most of those jobs were government census jobs. The market has probably priced in the 100,000 / 9.7%, so we'll have to see if there are any surprises. Thanks for reading. We'll see you back here tomorrow! Tom Crowley |