TSP Talk Blog

08/13/13

Stocks opened lower on Monday morning, but immediately bounced to recover the early losses. It was a very dull day from there as the indices moved sideways on light volume. The Dow ended the day down 6-points, and small caps led the way again.

Daily TSP Funds Return G-Fund: +0.0177% F-fund: -0.09% C-fund: -0.11% S-fund: +0.22% I-fund: -0.33% More returns

The S&P 500 is consolidating nicely so far without breaking down. This could be the calm before the storm but that support has been holding up quite well.


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

The small caps put in a positive outside reversal day yesterday, which can be a turning point for the market, but outside reversal days don't "always" reverse in the direction you might expect. Usually, but reversal days do mean a bigger move may be coming in one direction or the other. As I said, usually in the direction of the close of the reversal day - but not always.


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

The reason I am skeptical about this positive reversal day is because the upside looks very limited while looking at the long-term charts.


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

Yes, we could and probably should see some positive follow-through action based on the positive reversal day, but it may only be a short-term reprieve for an index that looks overly stretched to the upside.

The Rydex Traders are getting back in bullish mode. Although the 0.91 reading is not excessive, the sharp rise in bullishness since early July is the concern here, and could be setting up at least some kind of pullback in the coming weeks, and maybe even a correction (10%).


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

August is a fair - at best - month for seasonal strength, but for whatever reason (options expiration week?) there is a small pocket of positive strength from trading day 10 (Wednesday) to trading day 12 (Friday) this week.


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

But things go a little sour from there and into the end of the month. There are only 22 trading days in August this year so we probably shouldn't count on that big day on trading day #23.

So, the market is hanging on nicely right now. Volume is very light as folks are on vacation, but that means any bad news could shake things up very easily. I'm looking for volatility to pick up, but it keep wait until after this week's options expiration week.

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.