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Stocks mixed, Apple disappoints

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It was a choppy day for stocks on Tuesday but we saw a strong close to push the indices into the green as investors may have been optimistic about the release of Apple's earnings coming after the bell. The Dow ended the day up 36-points while the S&P and Nasdaq also saw small gains. The smalls caps lagged again with a 0.35% loss and the Transports rebounded with a nearly 1% gain.

Daily TSP Funds Return



For the second time in this young month, the stock indices were mixed with small caps lagging while the larger indexes traded in a tight range with just minor movement.

After the bell Apple reported earnings and there was some disappointed with iphone sales and guidance going forward, and the stock was down 2% or so in after hours trading. That could put some pressure on the Nasdaq particularly, but also the other indices since there are many companies that feed off of Apple. The Nasdaq has been resiliently strong of late, so we'll see if this Apple report puts a damper on that.

If you are a believer in seasonality, the May chart shows that the first couple of days do tend to do well, but then things get a little dicey going forward in the month.



We've all heard the "sell in May and go away" axiom and yes, May's average return going back 60 - 70 years is less than many other months', although still positive, but actually May has been positive each of the last four years.

As for the May through October "sell in May" thing, look what it has done during the first year of a presidential cycle.


Chart provided courtesy of www.sentimentrader.com


So we never know what kind of a result we'll get. Other than the Nasdaq which is making new highs, the other major indices all peaked about two months ago and are still fighting their way back, with some indies doing better than others so it seems to be a fund pickers market looking for where the strength is at any given time.

We get the April Jobs Report on Friday morning and estimates are looking for a gain of 180,000 jobs and an unemployment rate of 4.6%.


The S&P 500 / C-fund was up slightly yesterday and the chart remains in the bull flag that we have been watching (red). The gaps have remained open longer than I would have thought possible, especially since the first gap was created by the emotional reaction to the French election. Technically it is still in a solid position, above the 20 and 50-day EMAs, but it has so far been unable to break out to new highs. If the bull flag fails and can't push the index to new highs, I would suspect the gaps will come back into play.




The DWCPF (S-fund) was down 0.35% on the day and it continues to trade below the failed breakout area. At this point the bulls may be better off if this index washes out, fills the gap, then finds some support. It has pulled back from the new highs and is in limbo waiting for something. Which will it be, new highs or a filled gap first?




The Dow Transportation Index has also been pulling back from the late April peak and we have been watching what looks like a large bear flag forming. It rallied yesterday and moved back above the 50-day EMA, but it is also now testing some descending resistance.




The price of oil got hit hard again yesterday and that may have helped the Transportation Index. But I'm not sure how they will react if oil breaks down back below that $47 area for the first time since last year. Airline and trucking stocks like cheap oil since it reduces their costs, but the rails also transport oil and if demand is down, the Transport Index could feel it too.




The EFA (EAFE Index / I-fund) was up nicely yesterday, helped slightly by weakness in the dollar. It's at the top of its rising channel with two gaps below so the risk reward at this point may lean to the downside.




The AGG (Bonds / F-fund) rallied yesterday but remains in a bear flag. It looks to me like it may want to test that 50-day EMA again.




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

Tom Crowley


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


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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)

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