TSP Talk Blog

10/10/12

Stocks continued to pull back from their post-jobs report early spike on Friday, and while the Dow (-110-points) and S&P 500 (-14) are still in uptrends, we are seeing some downtrends in some indices.

Daily TSP Funds Return G-Fund: 0.0150% F-fund: 0.09% C-fund: -1.33% S-fund: -1.51% I-fund: -1.95% More returns

The S&P 500 seems to have created a lower high, but that won't become official until a lower low is made and that won't happen unless the strong support near 1430 is broken. The uptrend is intact so for now, this is just a little pullback in a bull market.


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

As we talked about yesterday, the Dow Transportation Index had run up for 6 straight days and may have run out of steam while trying to take out the 200-day EMA again. This index has been on a streak of 'all or nothing' lately - A string of 5 to 7 up days, followed by a steep pullback down to the bottom of the trading range (red lines). But this recent rally didn't make it up to the top of the trading channel like the prior few rallies, so this next pullback and test of the lower end of the trading channel will be key for the Transports and the rest of the market, being that it is a leading index - although this year it hasn't done a lot of leading.


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

The Nasdaq is now in a downtrend after yesterday's low moved below September's low, which followed a lower high. This is what we said the Dow and S&P 500 had not done, but like the Transports, the Nasdaq is a leading index so this could be strike two for the leaders.


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

It always seems that when I have a grasp of the what the dollar is trying to do technically, I get surprised with an unexpected move. The recent breakdown from the bear flag, which should have been bearish for the dollar and more bullish than bearish for stocks, decided to bottom and rally again. At least temporarily. A continued move higher in the dollar could give stocks some trouble.


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

But the rally in the dollar ETF UUP, is now testing the bottom of the flag and that could act as resistance. There is still some open gaps above and a slow move up to about 22.25 could happen and that would keep the pressure on stocks. Let's see how this wants to go.

The indicators are showing that stocks have rolled over and there could be some room for the pullback to continue because the indicators are just rolling over themselves and are not even close to being oversold yet.


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

It may take a news event to turns things back around, but I don't see any indications "yet" that this pullback is going to be anything overly harsh. That could change and we'll have to watch those key support levels on the S&P 500 and Dow Transports for clues. Once the longer-term trends break we'll have to take the downside more seriously.

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

Tom Crowley


Posted daily at TSP Talk Market Commentary

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.