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Stocks continued their sell-off on Monday with the Dow losing another 1175-points, on top of Friday's 666. I know it has been a while since we've seen anything like this, but the bigger the rallies are, particularly when they go straight up, the harder they tend to fall. The Dow was down a whopping 1600 points at the lows on Monday which was the largest intraday loss ever for the Dow, but percentage-wise it wasn't close to a record. Still, that was alarming.
Daily TSP Funds Return
The carnage was broad and with volatility so high, anything could happen from here. I doubt we'll see a "V" bottom after the steepness of the decline, but that doesn't mean we won't see some short-term relief. Emotions are taking over right now now so there may not be a whole lot of rational action. The futures kept going down after-hours, but that's not a surprise after day like we had.

The long steak of days without a 5% decline is over and that streak of 15 months without a loss in the C-fund is in jeopardy, but still intact, because of course February is not over yet. Back in January I was mocking one market analyst for saying, "I am so bullish, I have to sit down and calm down." That was the kind of complacency that you hear when a market has come too far too fast. To be fair, he did say that in early January and the market did continue higher for almost 3 more weeks before this correction hit, but those are the kind of things I look for as a contrarian investor.

Now we'll be on the lookout for excessive doomsday talk to know when this correction is over, which could come this week, or in months, who knows, but you'll probably know the rhetoric when you hear it. Based on the Fear / Greed Indicator, we may not be quite there yet, but it could still be enough for short-term relief.

Source: Fear & Greed Index - Investor Sentiment - CNNMoney

The SPY (S&P 500 / C-fund) fell through three levels of support with ease yesterday. The next support levels are a long way down but volume was extreme and that could mean some kind of relief is not far off. That doesn't mean the low is in but barring a complete breakdown (we're still down < 10% on the S&P) we could see some short-term relief - usually called a dead cat bounce - and while they could be large bounces, they don't always last very long after a drop like we saw.

The weekly chart shows some levels of support that could be tested next if the downside continues. 2600 looks key.

The small caps / S-fund were hit hard falling through key support and now looking for that old resistance line to hold again as it did in December.

The Dow Transportation Index broke through some support while closing above some longer-term support, which is an old ascending channel resistance line (red).

The EAFE Index / I-fund was down sharply and the dollar was up extending the loss, but because the overseas markets haven't fully reacted to yesterday U/S market, this could be worse, and the TSP I-fund share price was so they took that into consideration. There is some support in the 71.50 area, but that open red gap is there for the taking on any more short-term weaknes, even if it's an intraday move. There are now a couple of open gaps above (green).

The AGG (bonds / F-fund) was finally a safe haven play as the panic selling in stocks intensified. However, it is still within the down trend. Keep an eye on the dollar, which was also up and bucking its recent trend. Too much of a rebound in the dollar could hurt stocks and may push yields a little lower / bond prices higher. But if the dollar resumes its downside action, stocks could rebound more easily.

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:

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

Tom Crowley

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