TSP Talk Blog

Stocks flirted with a rebound on Friday but the closer we got toward the close, the more investors opted to play it safe over the weekend. The small gains at 2 PM ET, turned into sharp losses by the close and the Dow ended the day 168-points.

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For the week the Dow lost 1078 points. Whenever we see action like this the question becomes, will we get a snap-back rally or is this thing going to crash? Since crashes are rare - although devastating, we can say the odds favor that we could see some kind of relief rally this week.

Mondays are the day that we see washout or capitulation-like selling before the rebounds start. The futures are down about 0.75% as I write this Sunday night so we have a set up that could produce the kind of fear that you see just before a low. Does anybody remember August. That was nasty.



Now, I'm not saying we'll hit a low and be off to the races. I'm thinking short-term rebound and I'll let the market, which is showing signs of a top and another bear market, play out and help answer that one in the days / weeks ahead.

If you were in stocks last week you obviously took a hit. Don't panic. If you can't sleep, then by all means get out of stocks. But patience will likely give you a better selling opportunity, even if this is a new bear market.

The SPY (S&P 500 / C-Fund) broke down last week after the bull flag we thought could provide support, failed to hold. The selling was relentless and the Dow lost over 1000-points, but we still have not seen any high volume panic selling like we tend to see near lows. That's a concern. Perhaps today. As I mentioned often times we get the washout action on a Monday as mom and pop hear the news of the market dropping while reading their Sunday paper, call their brokers on Monday morning, and unfortunately for them, often end up selling near the lows.


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

The weekly chart shows the damage a little more dramatically and it is getting close to testing some very important long-term support lines.


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

The Dow Completion Index (small caps / S-Fund) has been in a bear market for months and did not come close to the old highs in the fall like the S&P and Dow had. It starts the year making a new 52-week low and it is close to testing the October 2014 low.


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

The EFA (EAFE Index / I-fund) also made new lows while falling 6.4% last week. Both the S and I-fund charts have a few open gaps overhead and we should see some of those get filled with a snap back rally at some point in the coming days or weeks.


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

The Dow Transportation Index continues to slide and we have been on this bear market bandwagon for a long time and, being a market leader, it has been a warning sign for the broader market for months. It is at new lows and sliding down the descending support line.


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

The price of oil was down again and is another negative catalyst for the stock market as it hit multiyear lows.


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

The AGG (Bonds / F-Fund) rallied on the weakness in stocks Friday. They may be hitting the top of a channel (blue) but if stocks continue to tumble that may not hold.


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

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Thanks for reading. We'll see you back here tomorrow.

Tom Crowley


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