TSP Talk Blog

06/28/13

It was another triple digit move for the Dow yesterday, but who's counting? OK, I will. That's 4 triple digit moves in a row. 12 in the last 13 trading days. 15 of 19 trading days in June. And 18 triple digit moves in the last 23 days. Yesterday the Dow was up 114-points.

Daily TSP Funds Return G-Fund: +0.0050% F-fund: +0.38% C-fund: +0.63% S-fund: +1.50% I-fund: +1.51% More returns

So what's the big deal? Isn't a triple digit gain good? Well, sure. But a market that is seeing continuous wild swings in both directions is a volatile, unstable market. That was something Trader Fred (one of our retired premium service writers) religiously looked for as an excuse to retreat into a defensive allocation.

The S&P 500 ran into the 50-day SMA (simple moving average) near 1620 yesterday morning and immediately retreated and closed at 1613. The 0.6% gain was a good deal for the bulls in the stock market, but the resistance is obvious. There is also a possible rising wedge (bearish) or it can be viewed as a bear flag.


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

And like 1987, the old long-term rising support line should also act as resistance after breaking below it last week.


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


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

I want to repeat that crashes are rare and this is not a call for a crash. But the set up is so similar to 1987 that I would be remiss to not mention it - over and over and over...

While a crash is rare, the charts do show serious bearish developments, despite the 3-day rally. Three triple digit gains in a row for the Dow sure seems bullish, but the light volume while bouncing up to resistance after a breakdown below support, complete with a bear flag and rising wedge, is not a bullish scenario... at least not yet.

The Dow Transportation Index ETF has rebounded nicely over the last few days, but it is also smacking its head up against strong overhead resistance.


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

Bonds have shown a little life over the last few days, but like the stock market, there is an ugly bear flag on the 7-10 year Treasury ETF, with volume much lighter on this bounce than during the recent sharp sell-off.


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

Should the major indices start to break above the longer-term rising resistance line and the 50-day moving averages, and investor sentiment remains on the overly bearish side, I will have to reevaluate my bearish view. Until then I'm preparing for some weakness.

By the way, we did see some bullishness in this week's TSP Talk Sentiment Survey, but the 1.53 to 1 bulls to bears ratio is just a neutral reading. That is quite a change and much less bearish than it has been, but it is still actually closer to a buy signal than a sell signal. We'd need to see 2.0 to 1 before we get a sell signal.

For those who follow the seasonality charts...

Chart provided courtesy of www.sentimentrader.com


Administrative Note: Starting next week, we should have a new service ready for you. Some of you may know our forum member Coolhand, who has been posting and writing blogs in the forum for us for nearly 9 years. He will be starting a free weekly report in the premium service area, which will be available to everyone who has a created a free premium login. As I said, it is free, but you will have to login to view the reports.

At some point in the future, and we are targeting January 2014 as the start date, "Coolhand's Market Analysis" will become a full service, daily subscription based premium service. If you don't have a login to the premium area yet, here is how to create one: Create Account. If you need help, please read FAQ #1... How do I sign up? Again, the first report won't be available until next week.

Also: The Ebbchart Premium Service will retire at the end of July so we won't be taking any new subscribers, or renewing monthly subscriptions come July 1. I want to thank ebbnflow for his years of dedicated reports and service. It has been a pleasure working with him. He is moving onto another endeavor and I wish him the best of luck!

Thanks for reading! Have a great weekend!

Tom Crowley


Posted daily at TSP Talk Market Commentary

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