TSP Talk Blog

Stocks opened sharply lower on Thursday morning after some concerns about the soundness of Portugal's largest public bank, and the European economy in general. The Dow lost 71-points but that was well off of the opening 180-point decline.

Daily TSP Funds Return More returns

We've been talking about Europe here lately as the charts were showing the cracks, and many have now broken down. Portugal only makes up 0.2% of our I-fund so it is not a major player for us, but it's the contagion that impacts the other European economies and markets. It was France that was showing the initial concerns.

The SPY (S&P 500 / C-fund) lost 0.40% on Thursday but it was more of a small victory for the bulls as the indices closed well off the opening lows. The longer-term support line is still intact but we are seeing some cracks in the chart, similar to what we saw over the last week or so in the European charts, which are now breaking down.


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

The Russell 2000 broke down from its rising support line earlier this week, but yesterday's action pushed it to a lower low and it closed below the 50-day EMA. These are not deal breakers and the market has rebounded time and time again after these kind of sell-off, but this chart should get your attention and if you stay aggressive in stocks and get burned here, you can't say you weren't warned.


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

The Nasdaq is also struggling but nothing alarming yet. The positive reversals don't hurt, but I'm a little concerned that the buying dried up with a couple of hours of trading left on Thursday. Given what happened in Europe, I would suspect investors won't be as eager to buy into the weekend, but I guess that may depend on what happens in the European markets on Friday, which are not yet open as I write this.


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

And while we're on it, here is what happened with the German DAX on Thursday - a clear lower low breakdown confirming the break of Tuesday' breakdown from the rising support line, and now 3 closes below the 50-day average. We could see some dip buyers step up, but the tell will be if people start selling the rallies.


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

France's CAC 40 fell below the 200-day moving average and its large rising parallel trading channel (orange). This is an ugly chart but it may be getting oversold in the short-term.


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

I don't show these European market charts to say - "avoid the I-fund." I say it because the charts are sniffing out the economic issues in Europe and we know how that turned out a few years ago. It doesn't just affect Europe.

Bonds were up Thursday, and like stocks, reversed from their early extremes - inversely, of course. We've seen a sharp spike up in the bond ETFs this week but now comes a little test in the 103.50 area on this chart.


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


Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the Sentiment Survey Results and its 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! Have a great weekend!

Tom Crowley


Posted daily at TSP Talk Market Commentary

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.