TSP Talk Blog

4/09/12

After a mixed day on Thursday, the stock market was closed on Friday, which may have been a good thing since the jobs report came up short with almost 100,000 fewer jobs being created in March than expected.


For the TSP, the C-fund was down 0.03% on Thursday, the S-fund lost 0.22%, the I-fund dropped 0.19%, and the F-fund (bonds) was up 0.20%.

For the weekly and monthly TSP returns, please see our recent TSP Weekly Wrap-Up.

The futures immediately dropped over 1% after the release of the jobs report on Friday, and as I write this Sunday night, it has not improved so we are looking at a very poor opening on Monday morning. But it's not all bad.

Monday morning gap opens, up or down, tend to be emotionally driven and they often reverse either intraday, or in the following days. I haven't seen sentimenTrader.com update this info recently, but there used to be a very strong tendency related to jobs report surprises, defined as coming in 50,000 above or below the estimates. In the case of a negative surprise of over 50,000, the market tended to recover any losses within 3 to 5 days, so this may be the buying opportunity some have been waiting for.

I am reluctant to use the charts and indicators because they won't include the action that is likely coming Monday morning. The S&P 500 closed at 1398 on Thursday, but should the action in the futures market hold, we'd be looking at a opening down in the low 1380's. That breaks through the 20-day EMA and the short-term rising trading channel (blue), but there is some solid support near 1370 where the 50-day EMA, the longer-term rising support line, and the 2011 high (old resistance becomes support) all intersect.


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

That will be a huge test for the bull market, but I am not overly concerned about it failing at this point. Sure, if it does break down I will change my tune, but in a strong bull market, buying a pullback to the 50-day EMA, particularly on the first test, is usually the way to go.

I have posted these next two charts many times showing how the 50-day EMA usually gets tested a couple of times before it breaks down in a bull market; meaning - if we do see a test of the 50-day EMA this week, there is a good chance it holds.


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


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

As if on queue, the Monday after the Good Friday / Easter holiday is historically weak, being positive only about 43% of time with a negative average return going back to 1950. Things get a little better as the week goes on.


Chart provided courtesy of www.sentimentrader.com That's all for today.

Put your seatbelts on. Monday could see some turbulence.

Thanks for reading! We'll see you back here tomorrow.

Tom Crowley


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