TSP Talk Blog

Stocks rallied strongly on Friday and we saw gains of 2% to 3% across the board. The Dow gained 397-points and the previously struggling 'V" bottom is trying to take shape again.

A surprise stimulus package out of Japan seemed to give markets a shot in the arm as investors continue to look to central banks for a catalyst to buy stocks.

Daily TSP Funds Return More returns

The final numbers for the month of January were not pretty for the stock funds, but Friday's big rally helped ease some of that pain. Bonds and the F-fund were the big winners for the month.



January's action didn't play out anything like its seasonality chart, but here is February's chart - normally a below average month but with a correction and a possible "V" bottom formed, it could start out with some momentum.


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

The action was very good on Friday but don't forget that bear market rallies can be explosive - but they can also be short-lived so we'll be looking for technical clues for a bear market buster.

I'm taking my annual trip to warmer weather this week so market commentaries may be brief as I struggle with my mobile equipment and enjoy some down time. Hopefully the market will cooperate and not do anything crazy on us. We need a break from the volatility.

The SPY (S&P 500 Index / C-Fund) looks "V" like so far but if you were around during the 2008 bear market you know that we can't always trust a rally in a bear market. Let's see if it can get to the 50-day EMA and that is where the big test will begin. The 50 and 200-day EMA's can be very stubborn in bear markets.




The weekly chart of the S&P 500 looks promising for at least a temporary bottom, but we still see a large rounded top forming so while there is some room to run, we may just be starting a rally up to resistance in a longer-term bearish market. We'll take it day by day and week by week before getting back to taking a bull market approach.




The Dow Completion Index (small caps / S-Fund) may have pulled of another bear flag breakout to the upside like we saw in September - although that kangaroo tail reversal may have made it a bull flag.




The Dow Transportation Index may be the canary in the coal mine as it is hitting the 20-day EMA and still possibly in a bear flag. This market leader has led the market to the downside since last spring.




Oil was relatively flat on Friday but the recent rally off the lows may have been the main catalyst for the "V" bottom in stocks. But like the Transports, it is hitting resistance now and the 50-day EMA may also get in the way.




The EFA (EAFE Index / I-fund) has a classic "V" bottom and has several open gaps above that may need some attention. The bad news is, there is also a large open gap down near 53 that could warrant attention as well.




The AGG (Bonds / F-fund) had a big day and continues to surprise during the rally in stocks. Technically the breakout is bullish for bonds but there is a large gap below the old resistance line that may need to get filled and that would create a failed breakout. We'll have to give it the 3 to 5 day confirmation rule.





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

Tom Crowley


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