TSP Talk Blog

08/26/11

Stocks opened higher yesterday, hit resistance, and went south from there. The Dow closed down 171-points. It's Friday, there a big meeting in Jackson Hole, there a huge hurricane on its way, and Europe is still in big trouble. Nerves are taking over.


For the TSP, the C-fund was down 1.55% yesterday, the S-fund lost 2.32%, the I-fund fell 1.61%, and the F-fund (bonds) added 0.17%.

The S&P 500 hit the 20-day EMA and dropped. That was what I was looking for; Would the 20-day be taken out, or would it act as resistance. We got the answer - at least on its first attempt.


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

The Nasdaq filled the open gap, and headed south. Unfortunately that is typical bear market behavior, but resistance is tough to take out on the first try.


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

I still think we are trying to form some kind of a bottom, but even if it is not a bottom, it is typical action after a sharp decline. I believe we will swing wildly for a few weeks and trying to time and trade it might be tough, but the buy and hold option won't make you any money until the market breaks to the upside, so it's your choice.

It happened in early 2008 after the 2007 head and shoulder broke down...


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

It happened later in 2008...


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

And also after the flash crash of May 2010...


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

Could it be different this time? Sure. But there is a reason why the market behaves this way after a sharp drop, so unless people have changed, we can probably expect the action to be similar to the prior instances.

The TSP Talk Sentiment Survey came in at a neutral reading so it will remain 100% C-fund for next week.

Thanks for reading! Have a great weekend! Stay safe this weekend if you are in the path of the big storm.

Tom Crowley

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