TSP Talk Blog

10/11/12

Earnings season got off to a rocky start yesterday as Alcoa beat estimates modestly, but their less than exciting forward guidance sent the stock down 5% and took the Dow (-129) with it. Fortunately for the bulls, the other indices weren't hit quite as hard, but they still closed down on the day.

Daily TSP Funds Return G-Fund: 0.0043% F-fund: 0.10% C-fund: -0.61% S-fund: -0.38% I-fund: -0.64% More returns

The S&P 500 lost a little over a half of a percent and is now testing that important 1425 to 1430 area. No harm yet, but it's getting close.


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

The Nasdaq slipped another 0.4% and if the index is going to start a descending trading channel (red) as it appears, it could find some support here, but the index is now trading below the 50-day EMA and that could act as resistance on any attempt at a rally.


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

The market is on the oversold side, but nothing extreme at all. The -500 level should hold if this bull market is planning to continue.


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

You can see that the overbought / oversold indicator tends to move in some kind of trend lasting a few months at a time. Since the early summer, except for a sharp spike up in September, the trend has been mostly sideways. If this -250 area is taken out on the downside, we could see a new trend of lower low oversold levels. That tends to happen when we see a more serious pullback or correction.

The Dow and S&P 500, normally the followers, have been holding up better than some of the leading indices of late so the question now is whether they will follow the leaders down, or if the leaders will start showing some life and follow the Dow and S&P 500 back into the positive trends.

It is earnings season and there can be some surprises from some of the larger market moving companies, and even if they are positive, we do tend to get a bit of a 'sell the news' reaction when we get out toward the 15th trading day of the month. Today is the 9th trading day in October...


Chart provided courtesy of www.sentimentrader.com

That large spike down on day #13 is a result of the devastating market crash in 1987 and distorts the long term historical average.

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.