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TSP Talk Weekly Wrap Up - 03/12/11

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Watching the 50-day average

Stocks were down last week as a combination of economic data, geopolitical events, and natural disasters shaped the financial environment and all of the major stock market averages closed lower.

For the TSP, the C-fund lost 1.21% on the week, the S-fund fell 2.11%, and the I-fund 3.36%. Bonds (F-fund) gained 0.43%, and the G-fund was up 0.06%.




The C-fund is now down 1.64% in the 1st nine trading days of March, the S-fund is off 2.03%, the I-fund has lost 3.46%. Bonds have become the safe haven as the F-fund is up 0.23% during this market decline, and the G-fund has made 0.09%.

I am always reluctant to show prior markets patterns as a map to what could happen next because it seems like every time I find a market “rhyme” it quickly ends. But this one is too interesting to dismiss.

On Thursday the S&P 500 broke down from an apex, or triangle formation, down to the 50-day EMA where we saw a modest rebound on Friday. Many times wedge and triangle patterns give us a fake-out move in one direction, only to quickly reverse and breakout in the other.


Chart provided courtesy of www.decisionpoint.com

We saw exactly that back in late November of last year. In November the market was slowly pulling back and the top news was resurfacing economic problems coming out of Europe, and the North Korean artillery strike against South Korea. A few days later, the S&P 500 started a new major bull run.

Who knows what will happen this time, but should the S&P 500 move below the 50-day EMA and stay below for more than a couple of days, I will go to plan B as it would be time to consider a more defensive approach. I know tensions are high now, but until the above situation develops, we might want to stick with plan A which is the possibility that the 50-day EMA actually holds. That is what our Sentiment Survey System is trying to tell us as well.

Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.

Tom Crowley
www.tsptalk.com
Weekly Wrap-Ups Archive

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