TSP Talk - Thrift Savings Plan Strategies

Market Comments

September 3, 2009

Current TSP Share Prices

Today's Commentary (Short Term Outlook)

Crisscross of trend lines

Stocks bounced around quite a bit yesterday with no clear direction, but a bout of late selling brought the major indices into negative territory by the close. The C and S funds ended the day down less than a half of a percent, but the I-fund closed higher because the selling came late in the day in the U.S. markets, and because the dollar fell again. Bonds and the F-fund were also up again.

The S&P 500 has now backed off of its relentless push up against resistance and is now in the middle of the larger rising wedge - after breaking below the smaller rising wedge. Some technicals are breaking down, but the 50-day exponential moving average (EMA) should hold if this bull market is going to continue.

The trend is up and support is strong, but the PMO indicator is trying to tell us that the S&P wants to move south.

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

The longer-term view below shows the crisscrossing of the many trend lines that out out there, and whether or not you believe they have any meaning, there are investors and traders out there that do believe in them and they will trade based on them so they become somewhat of a self fulfilling prophesy.

The large head and shoulders pattern (H&S) in 2008 created a neckline that is extending into this year's chart and we thought that it could be an area of resistance. It held temporarily, but the August rally eventually took the S&P 500 above it. Resistance once broke, can become support. I can't see the precise number that this neckline is crossing right now, but it is pretty close to where the S&P is now, although it is falling.

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

The neckline of the inverted H&S pattern that broke back in July, should also act as support should the S&P 500 pull back toward it. The problem for the bulls is that it is all the way down near 945, or about 5% below where it is now.

Then there is the rising support line connecting the lows from back in March. It is sitting roughly near 960 right now, but it is rising every day.

Yesterday I mentioned that we may know whether the bear market is coming to an end quite soon, and these trend lines and moving averages will be telling the story. If the 50-day and 200-day moving averages hold, and these trend lines hold, we can be confident that the bear is over and the new bull market will resume. That means buying the dips would be the play. Bull market rules say buy the dips.

If those support areas break down, we will have to go back into defensive mode, and into bear market rules which tell us to sell rallies..

Volume should pick up substantially next week, and with "The Boys" (what they used to call the top ladies and gentlemen of Wall Street ) coming back from their summer vacations. They should also help the market pick a direction.

Not that the seasonality picture is playing out as 55 years of history would have us believe, but here's a reminder that the Friday before Labor Day weekend tends to be good historically, and the week after is flat at best.

                              Chart provided courtesy of www.sentimentrader.com

I will be leaving town on Thursday evening and may or may not get a chance to write a commentary for Friday. Stop by just in case, but I won't make any promises.

That's all for today. Thanks for reading! We'll see you back here tomorrow or on Tuesday. If Tuesday, enjoy your Labor Day weekend!

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