TSP Talk Blog

Six weeks

We saw a brief rally on Thursday of last week, but that was it. Stocks have been down for six consecutive weeks now, and if anything the downside action has been accelerating. For the TSP, the C-fund was down another 2.21% for the week. The S-fund lost 3.35%, and the I-fund was down 2.40%. Bonds (F-fund) gained 0.10%, and the G-fund was up 0.05%.



For the last few weeks I have given historical evidence why we could expect a relief rally as the market had become quite oversold, and investor sentiment is very bearish (which is usually a bullish sign), but the market has continued to defy historical precedence.

The S&P 500 dropped below the April low last week, and even below the recent descending trading channel. Support once broken, tends to act as resistance on the way up.


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

The 200-day EMA is close to being tested near 1262. This could be a test of the integrity of the current bull market, and if you look at the weekly chart of the S&P 500 below, you can see that the long-term bull market support line, formed by connecting the lows starting with the March of 2009 low, is also in the 1250-1260 area.


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

For those who may follow the 200-day simple moving average (not shown) rather than the 200-day EMA (exponential moving average), it is currently at 1253.

The action we are seeing now has similarities to the bottoming action we saw in 2010. It is actually an inverted head and shoulders pattern (which is bullish) that is now testing the middle of the head.


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

That may be meaningless to some of you who are reading this on a website other than TSP Talk (hello OhMyGov.com fans!) but it basically means things need to turn around soon, or this market could be in for serious trouble.

Right now we have witnessed a 7.3% pullback which is serious, but normal action. According to some on Wall Street, a 10% decline would be considered a correction, and 20% makes it a bear market, although I have a different definition of a bear market that has to do with moving averages.

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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