TSP Talk Blog

09/09/11

The market got off to a sluggish start yesterday, it saw a nice mid-morning rally, but lost steam throughout the day as Ben Bernanke addressed the investment community. By the close the Dow had lost 119-points.



For the TSP, the C-fund was down 1.06% yesterday, the S-fund lost 1.54%, the I-fund fell 1.66%, and the F-fund (bonds) added 0.11%.

Nothing has really changed. The bear flag is still in play and the S&P 500 closed right in the middle of the flag. There is support below and resistance above. Bear flags tend to break to the downside but I guess nothing should surprise us in this volatile market.


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

I don't have too much to add to what has been said over and over. I see the very short-term (days) as a coin toss. The short-term (weeks) is negative because of the bear flag, but we will have to wait to see if any breakdown in the bear flag will successfully test the lows, or if we see another leg down. If the lows hold, stocks should do very well in the 4th quarter.

I continue to point to prior market corrections to show how long it can take for a bottom to be formed.

In 2010 the market saw a flash-crash in May and that low was tested over and over until we finally saw a breakout to the upside 4-months later.


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

After a waterfall-like decline in 2008, we saw months of consolidation between 800-1000 before a break down turned into the bear market bottom in March of 2009.


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

After a breakdown from a large head and shoulders pattern in early 2008, the S&P 500 consolidated between about 1250 and 1400 for months, and it actually went on longer than shown below, before new lows were made later in 2008. But those initial drops tend to be tested several times before a breakout or a breakdown.


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

That is the situation I believe we are now in, and it could take several more weeks before we find out which way it will reconcile.

The TSP Talk Sentiment Survey came in at 43% bulls, 47% bears for a 0.91 to 1 bulls to bears ratio which is neutral and keeps the system in a 100% C-fund allocation for next week.

Administrative Note: Sunday morning is the deadline! I started a "Last Man Standing" NFL football pool. It's real easy and it's free. For more info see TSP Talk NFL Pool. The deadline to join is September 11 at 10 AM ET.

Thanks for reading! Have a great weekend!

Tom Crowley

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