View RSS Feed

TSP Talk Blog

The rubber band stretches as we near budget deadline

Rate this Entry
It was another 200+ point gain for the Dow on Friday as the indices tack onto this historic rally to start the new year. Small caps lagged a bit but still posted a decent gain, while the I-fund keeps rolling along as the dollar fell to a 4-month low.
Daily TSP Funds Return
The rubber band continues to stretch and based on many indicators, it looks like it is pulling in the mom and pop investors who have been reluctant to join the party since the massive drubbing they took during the financial crisis. Unfortunately for them, once they come in the party may be getting ready to end - or at least the upside won't be as easy as it has been. It is a pattern that repeats itself in the investment cycle over and over.

Some of these cycles last longer than others, but no matter how we look at this one, the stretched rubber band is either getting ready to pull back... or snap.

This week all eyes will be on Washington D.C. again as the deadline for a budget deal is Friday. They always seem to kick the can down the road if a deal is not reached, and the market may be expecting that again, but what if the unexpected happens?
Earnings season is going to heat up this week and with the market being clearly priced for perfection, there may not be any room for errors. Everyone is expecting stellar reports and guidance because of the tax changes, so anything less may be a disappointment.

Speaking of January earnings week, this chart isn't telling us a whole lot since it's fairly old and the Martin Luther King Jr. Day holiday is relatively new, but clearly there is normally some weakness surrounding the holiday, and that probably has more to do with earnings season. Of course we did not see any weakness last week so it may not mean much here the week after.


Chart provided courtesy of www.sentimentrader.com



The SPY (S&P 500 / C-fund) cut through another level of resistance on Friday, which seems to be par for the course of late. As we mentioned above, the indices may be priced for perfection and earnings season could confirm or refute that perspective and the angle of incline.




The weekly chart of the S&P 500 is showing just how much of an anomaly this market is right now. It doesn't matter if we look at the daily, this weekly, or the monthly chart, they all say the same thing. The question is whether the obvious is too obvious, and the rally can just keep going despite it all.




The small caps / S-fund has been in a bit of a funky looking rising wedge formation, which tend to be more bearish, but late last week the chart had no problem moving above the resistance. It could be a fake out, but in this environment, I don't know.




The dollar gapped down and moved to a 4-month low on Friday. It broke down from a bearish head and shoulders pattern and the technical downside target would be about 23.5. But there are open gaps that could get filled in the interim.




The weakness in the dollar continues to give the EAFE Index (I-fund) a boost as it defies gravity.




The High Yield Corporate Bond Fund was actually down on Friday, which is interesting on a day with the Dow up 200+. You can see that it may be getting squeezed between support and resistance and something will have to give this week. It could be telling for the stock market.




The AGG (bonds / F-fund) has been unable to get back above the old support line that it broke down from last week. The 200-day EMA held on the first test but if it can't get back above that red support line, I suspect another test of the 200-day would be coming soon.




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 rubber band stretches as we near budget deadline" to Digg Submit "The rubber band stretches as we near budget deadline" to del.icio.us Submit "The rubber band stretches as we near budget deadline" to StumbleUpon Submit "The rubber band stretches as we near budget deadline" to Google

Comments


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