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Someone pulled the plug

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Stocks were pounded on Tuesday and if you asked 5 people why they were down, you may have gotten 5 different answers from the trade deal with China not actually being a deal, to the economy is slowing, to political issues, but we have been looking at the charts as many had reached some overhead resistance that clearly held. The Dow lost 799-points on the day and you can see the carnage below.

Daily TSP Funds Return

So it's difficult to put a finger on the exact issue, but we did recently have two emotional rallies coming from the Fed's more dovish outlook and a truce with China, and emotional moves in stocks tend to seek their level. Not that those actions did not warrant a rally, but they were fairly excessive in a market that has been trending lower for months.

Of course Tuesday's sell-off had a lot of emotions involved so we'll see if the bears can continue to put pressure on, or if the very short-term is oversold enough for a bounce. The futures are up modestly (+16 for S&P) as I write this on Wednesday evening. They were trading on Tuesday night and into Wednesday, although they haven't opened for Wednesday evening session yet. But if the bears have their way, those gains might not hold when the stock market opens on Thursday morning.


The November jobs report comes out on Friday morning. Estimates are looking for a gain of 189,000 jobs, and unemployment rate of 3.7%, and average hourly earnings going up 0.3%.




The S&P 500 / C-fund reversed course after the strong rally up near the top of its bear flag. Then it pulled back and filled the open gap early on Tuesday but continued lower and had one of the worst days of the year. There is a tiny open gap near 2682, but that may not be significant in a fast moving market. The bottom of this bear flag is near 2650 and that will be a key level for the market. Obviously a breakdown there could be devastating since a downside target would be another 4-8% down below the flag. With seasonality picking up in the latter half of the month, the bulls will have an advantage, but from what levels will a Santa Claus rally begin?




The DWCPF (S-fund) also failed at the top of its bear flag and the 50-day EMA. That's bear market action so again, the bulls have some work to do if they want to save this chart.




The Transportation Index had been flying high and leading the major indices higher, that is until the negative reversal on Monday, which was followed by the 4.4% decline on Terrible Tuesday.




The I-fund was somewhat saved by some of the overseas markets being closed during Tuesday's sell-off, but that could catch up to it on Thursday.




The High Yield Corporate Bond Fund also failed at key levels after the failed breakout on Monday. It is back below the 50 and 200-day EMAs, as well as the descending resistance line.




The AGG (F-fund) rallied big on Tuesday as investors opted out of stocks and into bonds. It closed well off the highs but still had a solid 0.27% gain. Also, the chart keeps looking better and better - except for the possible kangaroo tail reversal - but it broke above multiple levels of resistance on Tuesday.




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

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SPY (C Fund) (delayed)

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

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

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

(Stockcharts.com Real-time)