View RSS Feed

TSP Talk Blog

The bulls are getting close, but...

Rate this Entry
Stocks opened higher on Friday but faded from the early highs and closed near the day's lows. The indices ended the day with mixed results as the Dow lost 57-points and the S&P 500 was down slightly, while the Nasdaq, small caps, and the Transports each closed with modest gains.

Daily TSP Funds Return

Stocks in general have been in a longer-term downtrend, and depending on your definition, can be considered still being in a bear market. The action has been much better of late, but bear market rallies can be very powerful so the question we are faced with is whether this is still a bear market rally destined to fail, or if the bear market is done and a new bull market beginning? It's so close to being determined. This is either the worst time to be a buyer, because the bear market rally may be near an end. Or a good time to buy as we say good-bye to the bear. But we're still not quite ready to make the call.


Once again the price of oil was in the spotlight and it posted a negative reversal day after initially breaking above the 50-day EMA. It remains above the old descending resistance line and that reversal may see it testing that old resistance for support some time today.




China's Shanghai has been less of a catalyst lately but the sharp sell-off on Thursday really shook up the chart and it could be a big bear flag. If the flag breaks down, as they tend to do, that could send shock waves in the western markets, so keep an eye on this one.




The index futures just opened up as I write this Sunday evening without too much fanfare. There was a slight push to the downside, but that can and likely will move around dramatically overnight. Last Sunday the futures opened sharply lower and the market ended up opening with a gap higher on Monday morning, so you never know.

The S&P 500 (C-Fund) closed near the lows of the day on Friday but it remained above the 50-day EMA and SMA. For those who watch the Fibonacci retracements, 1964 was the 50% retracement level of the decline from the 2015 highs, and Friday's high was 1963 before it started to fade. 61.8% is another important retracement level and that would be close to 2000, where the 200-day EMA is currently sitting.




The Dow Completion Index (small caps / S-Fund) has been impressive lately but this index, which has been in a bear market for months, is now testing the 50-day EMA. The S&P 500 and the Transportation Index have been able to break-through, and now it is time for the small cap index to prove itself.




The Nasdaq is also testing the 50-day EMA and it backed off from it on Friday. The inverted head and shoulders pattern is a bullish pattern in general, but as I mentioned last week, head and shoulders patterns can be tricky. They are continuation patterns meaning they are more bullish in a bull market and bearish in a bear market. But major inverted head and shoulder patterns can act as positive reversal patterns and create a bottom. That doesn't help us here, but a breakout above that 4600 area that holds for several days could be a bullish sign. The 200-day EMA is usually the ultimate test of a bear market.




The EFA (EAFE Index / I-fund) is also up against some resistance. Like the other charts, the bulls are giving it a good shot and the fact that the indices held up last week in the face of some resistance is starting to bode well, but we're just not quite out of the woods yet. There are still a few obstacles in the way.




As I mentioned last week, gold and bonds have been acting like there is trouble out there. But during the recent rebound in stocks, they have both consolidated a bit. The question is, is this now a bull flag in gold that is getting ready to resume its recent upside trend?




The March seasonality chart is a healthy one but as we know, 2016 has not followed the typical historical seasonal trends. But it has followed a typical election year trend and this time of year gets a little more bullish during an election year. At least for the next several weeks, but in April the election year seasonality turns quite negative again.


Chart provided courtesy of www.sentimentrader.com


Bonds remain in a bullish rising trading channel.




Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php

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

Tom Crowley


Posted daily at www.tsptalk.com/comments.php

The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.

Submit "The bulls are getting close, but..." to Digg Submit "The bulls are getting close, but..." to del.icio.us Submit "The bulls are getting close, but..." to StumbleUpon Submit "The bulls are getting close, but..." to Google

Comments

  1. valleymd's Avatar
    Is there a head & shoulders pattern in the S&P 500? It Looks ominous if you look at a 6 month chart, left shoulder was in Sept, head Oct-Jan, right shoulder Feb & (maybe March). April, look out below?
  2. tsptalk's Avatar
    I actually had this chart posted in the Plus report on Monday...


S&P500 (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
BND (F Fund) (delayed)

(Stockcharts.com Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes