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Relief!

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Stocks bounced back on Turnaround Tuesday, erasing Monday's losses in many indices as oversold conditions drew in value hunters. The Dow gained 269-points as the swings remain wild. Whether you are bullish or bearish on this market, we expected some kind of relief rally. The question after something like this is whether the upside can sustain itself, or if it sets up a sell the rally effect.

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Whenever stocks sell off sharply to the point of panic, we should always be thinking about how we want to play it. Some will jump on the rally in the hopes that the low is in, while others will take more profits from the stocks that were much lower a couple of days ago. Now that we had a big rally, it's getting time to decide or you may miss your opportunity. If you think it's going to go down again, this is your chance to sell anything you were stuck with. If you think the market has bottomed, you want to jump in before it runs away from you. That information doesn't help you make your decision, but it is probably better to make that decision while markets are closed, otherwise your emotions will get the better of you with every tick up or down during trading hours.

The SPY (S&P 500 / C-Fund) rebounded strongly on Tuesday gaining back all of Monday's losses. It improved the technical picture by recapturing the 200-day EMA, and it also filled the gap left open on Monday. There's another large gap up near 209 and whether that gets filled any time soon is the $64,000 question. Of course these days many of us have a lot more than $64,000 on the line. If you are young enough not to know what the $64,000 question means, Google it so you'll know what us old folks are talking about.




Yesterday I said that the weekly chart had fallen below the right shoulder in the large inverted head and shoulders pattern. I said it was possible, but not probable, but it actually only took one day to close back within the right shoulder, and that's a key level to maintain for the bulls.




The DWCPF (S-fund) rallied almost 2%, but that actually lagged the larger caps as it did not get back Monday's losses, and of course on Friday it had lost 4% so this one has some work to do. The gap above is still open so that may be the short-term target for now, and from there the 200-day EMA could stand in its way.




The price of oil has held up rather well while stocks were falling on global growth concerns. Even with the recent strong push higher in the dollar the WTIC remained above the 50-day EMA, possibly creating a double bottom low.





The EFA (I-fund) chart once again looks like Swiss cheese as yet another gap was opened yesterday. The blue gap below was filled and now two red gaps remain open - one large one above, and one small one below.




The dollar was down sharply, creating a negative reversal day, but it remained above the 200-day EMA. Depending one which resistance line you look at, the longer term-trend in the dollar may still be down, although it did break above some shorter-term resistance since the Brexit vote (dashed line).




The AGG (Bonds / F-fund) was up again although it looks a little stretched here, pushing above some short-term rising resistance. The 10-year Treasury yield is at a 4-year low of 1.46%. Obviously the idea of a rate hike from the Fed is a distant memory for the bond market.




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. We'll see you back here tomorrow.

Tom Crowley


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

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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S&P500 (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
BND (F Fund) (delayed)

(Stockcharts.com Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes