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Post holiday question marks

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It was a quiet day last Thursday, the day before the holiday, and despite the Dow losing 16-points, we did see modest gains in most of the major indices. The Dow was down mainly because of weaker than expected earnings from IBM and American Express. Bonds were down.

Daily TSP Funds Return
Seasonality is fairly good this week (post Easter weekend) although the Monday after Easter does not have a good track record. I had been talking about last week's rally possibly being a pre-holiday reversal 'fake-out' from the downtrend we had been in, and that theory may or may not pan out. If it is the case, then we would see the downside action resume this week. But the gains have been very solid and the action is similar to what we have seen time and time again in 2013 - 2014, and the bounce has come off of some very strong support levels on a few of the charts, so perhaps the holiday reversal will not be in effect.

The SPY (S&P 500 / C-fund) chart looks pretty good here compared some of the other indices like the Nasdaq and Russell 2000. The fact that it recaptured the 50 and 20-day EMAs is a plus, but I still have that pre-holiday fake-out possibility on my mind that could have us leaning the wrong way this week.



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


The Wilshire 4500, which is our S-fund, made a very solid move back above the old long-term rising support line (red). Again - a pre-holiday fake-out, or is this another pullback that needs to be bought aggressively like the prior pullbacks in 2013 and 2014?


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


The Nasdaq is in the same situation, but there are few interesting points to make here. The bottom of this 9.7% "correction" (10% would be an official correction) came at the 200-day EMA (blue) - which is a perfect place to find support. Plus, it coincides with the long-term rising support line (red). More perfection. The problems to me are the aforementioned pre-holiday strength in a downtrend, and the fact that the Nasdaq ran up quite sharply yet is still 80-points below the 50-day EMA. During the prior two lows the Nasdaq didn't have as far to go before moving back above the 50-day EMA. I can see a possible stall near the 20-day EMA, which is about 42-points away, and that number is shrinking as the 20-day EMA is falling. There's another issue regarding the midterm elections which I'll show below.


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



Here's the seasonality issue when taking the mid-term election year into consideration. This is 59-years worth of data ending in 2009. Clearly there is an historical issue with stocks between mid-April and early October. And since we're sitting in mid-April, is it possible that the new high made in early April is going to be the high until the Fall? That's what history might be telling us.




The bond ETFs are remaining in their ranges and I guess it's time to officially put the 20+ year TLT ETF in a rising trading channel, while the 7 to 10-year IEF remains in its sideways trading channel.


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


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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.

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Comments

  1. JTH's Avatar
    Thanks Tom, I couldn't agree with you more, from my perspective, April & May are can be the trickiest months of the year to play.

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