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Friday's Commentary ... Oops!

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It looks like my Friday commentary didn't get posted in the Blog area for some reason. It was posted on the main comments page - TSP Talk - Market Commentary so you may have seen it)... Sorry about that. Better late than never?


Stocks rallied strongly again on Thursday as the Dow jumped another 369-points and that makes it 988-points in 2-days. Talk about a snap-back rally. As we've said, they can be explosive. They can last days, and even weeks, but the easy money may have already been made.

As they say, you never make money panicking and it was so easy to capitulate earlier this week and sell in a panic, and of course that would have you missing the rally. If you wanted to be a seller, usually waiting for the relief rally is your best bet, although during that emotional drop all reason seems to slip away. It's why I advocate having a plan. Now that we've had a big rebound, the question becomes, have we bottomed, or will we go back and tests the lows? Both are possibilities.

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The dollar has also rebounded this week and that's putting a little pressure on the I-fund in comparison to the U.S. funds. Bonds were up.

The SPY (S&P 500 / C-fund) has bounced back and has now had three positive reversal days this week, although Monday's could have been considered a negative reversal day too because of the long tails on each end of the candlestick. As always, if this is the start of a bear market, the 200-day EMA, and even the 20-day EMA, could be tough nuts to crack on the way back up. There is some room between where it now and the EMAs so there is some wiggle room before it gets tested. It's not often that you get a 1000-point rally in two days and there is still more room overhead before resistance is hit.


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


The Dow Completion Index (S-Fund) is still lagging the larger cap stocks. The big rally yesterday did fill a large open gap (green) and there are now two open gaps (red) on the chart - one above and one below.


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


The Dow Transportation Index has also filled an open gap and there is a little more resistance here than just the 200-day EMA - which is way above the current levels. That's because this index has been in a bear market for months already. Will the other indices follow this lead? Arguably, they have already started.


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


The EFA (EAFE Index / I-fund) has bounced strongly but the rising dollar has held it back a little. We could know in the next few days if this is going to be a "V" bottom - or if we're seeing a bear flag being generated.


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


Oil jumped a whopping 10% yesterday which helped fuel the rally in stocks, but it is also in bear market and running into a little resistance already. It looks like a test of the 50-day EMA is possible since it has been going straight down for so long. I see the overnight futures have oil up another 2% as I write this Thursday night, so perhaps it will try to reach for the 50-day EMA.


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


China's Shanghai may be what the U.S. keys off of, if not the price of oil. This is a broken chart but like U.S. stocks, it has come a long way down in a short amount of time and those gaps may want to get filled in the short-term before the downside resumes - assuming it does resume.


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


The
AGG (bonds / F-fund) was up slightly and recaptured the 50-day EMA on Thursday, but remains below the old support line and the 20-day EMA. This looks a little bearish but as long as it holds above the 200-day EMA I'd say that the up side is still the path of least resistance for now.


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



Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php

Thanks for reading. Have a great weekend!

Tom Crowley


Posted daily at www.tsptalk.com/comments.php

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