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Back in an uptrend but gaps are open

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4/30/12

It was another positive day for stocks on Friday, despite Standard and Poor's downgrade of Spain's credit rating. The Dow did finish off of the highs, but held onto a 24-point gain.


For the TSP, the C-fund gained 0.24% on Friday, the S-fund was up 0.63%, the I-fund made 0.60%, and the F-fund (bonds) gained 0.08%.

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

The S&P 500 is back in an uptrend and as usual we will be watching how much support the index gets from the 20 and 50-day EMA's, and also the trading channel. I'm not seeing too much wrong with this chart, but...


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

The Nasdaq has a large open gap that may need to get filled.


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

Not all gaps get filled - Those are called breakaway gaps- but breakaway gaps are not usually found on an index funds, but rather on an individual stock chart where a news event may have a large impact on a stock's action such as an surprise earnings report or a scandal, etc. So this gap on the Nasdaq is something we may need to be concerned with.

You can see that the Russell 2000 chart (small caps) is littered with gaps, and all but last week's gap has been filled, so I can only assume this one will eventually get filled. That means we could see 800 again soon (currently 825).


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

The dollar has been trading in the 78 to 81 range for several months, but the recent head and shoulders (H&S) pattern may mean a breakdown is coming. There is support at the 200-day EMA, but if it and the neckline of the H&S break, the downside target would be below 77.


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

That would actually help stocks a little since weakness in the dollar has the effect of raising the prices of anything traded in U.S. dollars. Unfortunately that may mean the price of oil, gasoline, food, lumber, etc., would also go up.

Bond yields have remained stubbornly low as the weaker than expected economic data lately has kept interest in the bond market high despite stock prices going higher. (Bond prices go up when yields go down.)


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

Here is the May seasonality chart. Quite a but of red after day 3.


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

This coming Friday the April jobs report will be released. Estimates are looking for a gain of 162,000 jobs and an unemployment rate of 8.2%.

The TSP Talk Sentiment Survey came in at 52% bulls, 36% bears, for a bulls to bears ratio of 1.44 to 1. That is a neutral reading in a bull market which means the survey system will remain 100% S fund for this week.

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

Tom Crowley


The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.

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Updated 04-30-2012 at 09:12 AM by tsptalk (seasonality chart added, H&S corrected)

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