A bit of a breakdown.  Is it time to buy?

For the last four months the market has rewarded buying the dips.  Is it time to buy this one?  Each short term oversold condition was an easy buy signal.  Will this one be as well?  The answer isn't so simple.  The problem for the market comes when oversold conditions are not bought.  That is what triggers longer term declines.  Since I have been looking for a longer term decline based on my indicators, I am thinking we will not be rewarded by buying here.  But the answer won't come until we see what happens next.  That's what makes it tough to time the short term in our mid-day deadline TSP accounts. 

Sure we could get a little bounce regardless of what ends up happening, but will the market rebound enough to get the S&P 500 out of this recent down trend that started in the first days of August? 

I marked four potential support areas for the S&P 500.  We are currently parked on the first one (#1 in red below) at the 50-day moving average.  Number 2 is the recent upward trend line from the lows last spring.  Number 3 is the 200-day moving average.  And number 4 is the bullish trend line connecting the 2004 and 2005 lows. 


                         Chart provided courtesy of www.decisionpoint.com

I am not a stickler for using these trend lines for drop dead support levels during pullbacks.  You actually see breaks in these trend lines which tends to trigger some panic selling causing the masses to get bearish enough to put in a bottom.

But that is way too premature to talk about.  Let's see how things play out first.  If we are indeed in a new downtrend we are likely to see people sell the rebounds as opposed to buying the dips as we saw during the recent uptrend.

We are in the thick of the dog days of summer.  Historically this week starts a very weak stretch for stocks.  In the last ten years the average return from the August option expiration through the end of the month was -1.8% with 4 of the 10 positive. The average gain was only +0.9% while the average loss was -3.5%. Taking a longer-term view, the return from August option expiration through the end of September was -3.0% with again 4 of 10 positive. The average gain was +2.7% and the average loss was -6.9%.

For some reason today is a very strong day historically...
 

Day / Date	% Positive	Avg Ret
August 17th	72%	0.26%
13th day of month	50%	(0.10%)
158th day of year	66%	0.26%

That's all for today.  Currently 100% G fund.  Thanks for reading.