TSP Talk Blog

Stocks had one of those wishy-washy days during a sell-off where we didn't get a high volume washout low, nor a strong reversal higher. We had a little bit of both, but not enough of either to give us an all's clear sign. The Dow did gain 52-points, which beats a loss, and it did close strongly and well off the lows, but volume was light and it looks likes a rally that could easily be sold off again. The S&P 500 was flat and the Nasdaq was down slightly. The dreaded small caps and Transports lagged again.

Two to three day relief rallies could continue to be sold until we get the panicky capitulation that we typically get after a significant sell-off. It's not mandatory, but it's a more solid sign of a low.

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The fact that the Dow and S&P 500 were up at all yesterday was actually impressive because the recent catalysts, China and oil, were both down a whopping 5.3%. Oil actually went below $31 a barrel at one point. Both are deep in bear market territory.





I didn't even mention the December jobs report from Friday which came in much higher than expected with higher revision to November's report. The 292,000 jobs created was well above estimates and that concerned investors as that is more fuel for the Fed to continue raising interest rates. Never mind that it is good data for the economy. Wall Street is more concerned about cheap money and these mixed signals we see from the price of oil, China, and the jobs report certainly adds to the uncertainty.

The SPY (S&P 500 / C-Fund) has been in a narrow descending trading channel since just after Christmas. These steep angles of descent can't last forever but a downtrend can last a long time as we seen over the years. There is one large open gap on the SPY chart all the way near 204. That may take some time to get filled, but there are a lot of smaller gaps on the other charts that could present possible upside relief rally targets.


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

The Dow Completion Index (small caps / S-Fund) has been in a free-fall so far this year, but you can see those open gaps that looks like ripe fruit that could be ready to be picked - bear market or not.


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

This longer term chart of the S-Fund shows the damage done since the June top and here it is all the way down testing, and temporarily falling through, the October 2014 lows yesterday.


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

The Dow Transportation Index lagged again yesterday, not able to move into positive territory like its bigger sibling, the Dow Industrials. It temporarily broke below the descending support but did close above it. Obviously this is getting extremely oversold. Similar reversal days triggered short-term relief rallies while keeping the down trend intact (green). Only one of the reversal days failed to produce any rally (Jan 4), and that was a questionable reversal day since it closed closer to the lows of the day than the high.


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

The EFA (EAFE Index / I-fund) also posted a possible reversal day and the question is, how weak is this market? Is is capable of filling any of those gaps or is it just going to collapse? A collapse is unlikely, but they do happen and what else can you say? If you get caught in one it really leaves a mark.


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

The AGG (Bonds / F-Fund) pulled back and posted a negative reversal day as it stays within what could be a large bear flag.


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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