TSP Talk Blog

6/22/12

Stocks fell sharply yesterday after a bout of weak economic data and more trouble across the pond. The Dow lost 251-points on the day, wiping out all of the week's gains, and that was before the news of Moody's cutting the credit ratings of 15 major banks was released.

Daily TSP Funds Return G-Fund: +0.004% F-fund: +0.16% C-fund: - 2.21% S-fund: - 2.53% I-fund: - 2.48% More returns

I think RevShark put it best in his Thursday Afternoon Commentary; talking about the recent negative news flow including the very ugly Philly Fed number, troubled Spanish Banks and Moody’s downgrade of US banks he said, "There are just too many negatives and [yesterday] they outweighed the vague promises of future quantitative easing."

The rising wedge pattern(s) we had been watching (red) did break down as the overhead resistance was at least temporarily too much to overtake.


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

The neckline of the inverted head and shoulders pattern also broke down - possibly just an emotional temporary break - but that brings back into play the possibility of a test of the middle of the head. But if that happens the S&P 500 would have to move back below the 200-day EMA so I don't want to get too far ahead of myself after one down day.


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

As a reminder, here are the two more common outcomes of an inverted head and shoulders pattern, and now that the neckline has been broken, will we see head test?



We've been talking about the negative trend of June's post options expiration week. The week dad closed in negative territory for nine consecutive years...



... and we entered yesterday with a weekly gain of almost 1% in the S&P 500. Now we go into Friday with a loss of about 1%. Considering the recent negative news, I would be surprised if investors were big buyers going into the weekend, but the market has surprised me many times before.

The indicators are now more toward neutral but still slightly overbought, and yesterday's sentiment survey not surprisingly showed that our readers are very bearish. 29% bulls and 59% bears. That's about as bearish as we ever get, which tends to be bullish.

Next week we should get the Supreme Court's ruling on the constitutionality of the Affordable Care Act (Obamacare). That has the possibility of being a market movers as well.
Thanks for reading! Have a great weekend!

Tom Crowley


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