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| Today's Commentary |
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Outside day Stocks opened higher yesterday, but flipped by the early afternoon and by the close the Dow lost 31-points and created a negative outside day on many of the major index charts. For the TSP, the C-fund fell 0.40% on Thursday, the S-fund lost 0.28%, and the I-fund added 0.21% after more weakness in the dollar. The F-fund (bonds) was up 0.05%. The S&P 500 pushed up above the 200-day simple moving average (SMA) early on, but spent most of the day trading between that 200-day SMA, and the 50 and 200-day EMA's. It wasn't much of a surprise to see the 50 or 200-day EMA act as support on the first test. We can see the "outside day" that was formed yesterday and it does have a negative connotation since it closed on the lower end and below Wednesday's low.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk We also have the negative divergence of the MACD indicator, and what looks like a new rising wedge pattern; also bearish, but can take time to break down - if it actually does. The bulls have a lot of interest in seeing the 50 and 200-day EMA's hold, as well as the new rising trendline, and the July 20th low (1056). If the bottom is in and the July lows turn out to be "the" low, and we are starting a new bull market, these levels really do need to hold. Sentiment is not overly bullish at this time, but during a bear market when the bull to bear ratio hits 1.0 to 1 or higher, the market tends to back off - even if just for a few days. 
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The TSP Talk Sentiment Survey is in the same neighborhood sitting at a 1.05 to 1 bulls (43%) to bears (41%) ratio. There is a positive sign coming out of the Dow Transportation Index, one of the market leaders. Not only has it created a higher high after breaking the downtrend earlier in the month, it has also broken above all of the EMA's, and it has now created a bull flag, a formation that tends to break to the upside. Being a leading index, this is a bullish sign for the broader market. The Transports are very sensitive to the economic changes, so this could also be a good sign for the economy.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk And speaking of the economy, today we get the 2nd quarter GDP report. Estimates are looking for a growth rate of between 2.5% and 3.0%. Anything outside of that range could produce a big move in the stock market. Obviously the higher the growth, the better. Thanks for reading. Have a great weekend! Tom Crowley |