TSP Talk Blog

11/10/11

Yesterday we talked about the nervousness of investors as Italy's 10-yr bond moved toward a 7% yield. Well, it blew right threw it and investors went running. The Dow lost 389-points on the day and the indices are now testing some important support levels.


For the TSP, the C-fund lost 3.66% yesterday, the S-fund dropped 4.33%, the I-fund fell 4.60%, and the F-fund (bonds) gained 0.22%.

The S&P 500 chart is showing something interesting. Yesterday we mentioned that the angle of incline of the recent trading channel (blue lines) would be tough to sustain, and the losses yesterday did break that channel. Now we see a possible new, more realistic trading channel developing (red lines), but that support area is being tested right now.


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

It is also looking more and more like the big rally in late October after the Greek bailout was announced, was a brief, news-driven, failed breakout of the new trading channel. Yesterday's big news driven sell-off took the S&P just below the 200-day EMA. A strong market would quickly take back the 200-day so we'll see how that plays out today.

I do see a concerning, possible repeating pattern showing up. The two red boxes show lower highs and of course the first one preceded the August "crash". So far the current one has not made a lower low so it is very important for the new trading channel in the above chart hold, to keep from seeing one of those lower lows.


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

The Nasdaq has remained above the 200-day EMA which, as a market leader, is a good sign.


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

Looking at some indicators, the NYSE overbought / oversold indicator has move back into neutral territory. If we are indeed beginning a new bull market, this could act as a support area.


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

The NYSE ARMs Index had quite a day. The ARMs Index measures the amount of volume in declining stocks versus volume in advancing stocks, so a very high number means selling volume is exceptionally lopsided. The move over 7 is very rare.


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

It is only the 3rd time in the past 20 years we've seen a close above 6. The table below shows the S&P 500's performance following other readings above 6 since 1950. The index was positive a month later every time.


Chart provided courtesy of www.sentimentrader.com

So the problems in Italy are what they are, and I can't image too many people were really surprised by this. We knew it was coming but when it happens I guess we still react. It's like when someone you know is very ill and is not given much time to live. You know it's inevitable but still, it isn't easy when they pass away. Despite the pain, we have to move on. I hope this analogy isn't offensive to anyone. I'm terrible at expressing this type of thing.

The TSP will be close on Friday for Veteran's Day. The share prices will not be updated and per the TSP, any transactions that would have been processed Friday night (November 11th) will be processed Monday night (November 14th) at Monday's closing share prices.

Thanks for reading! Enjoy your holiday weekend!

Tom Crowley


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