TSP Talk Blog

We got our Turnaround Tuesday for a second straight week, although last Tuesday's intraday turnaround did not roll into Wednesday. This Wednesday (today) it has a second chance to do so. The indices bounced back and forth dramatically all day with 4 separate 1% intraday rallies and declines, and by the close the Dow and most indices were near their highs of the day. The Dow closed with a gain of 432-points and this time the small caps came along for the ride with a 1.87% gain.

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If you're looking for back-to-back positive days for the S&P 500, this last trading day of the month would have to break a trend. There were no (zero, nada) back-to-back positive days, and only 6 up days total in October, so it's been quite a month. A positive day today and we may start seeing some cash nibbling to get back in.

Early November does have an historically positive seasonal bias, but in this kind of market seasonality is a secondary concern and is not going to be the deciding factor, but it won't hurt.


Chart provided courtesy of www.sentimentrader.com


There's a lot of skepticism out there after yesterday's rally, and justifiably so. The bulls need to put together a couple or more up days to draw in some new money, but until they do, the bears will keep pounding away. The futures were up after the close after some positive earnings reports, and were holding as of this writing. What this market may need is one of those gap and goes, which we saw several times off of the bull market lows, but that may be too much to ask for in this environment.

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The S&P 500 / C-fund put together a rally yesterday but the action was held within Monday's highs and lows making it an inside day. So nothing has really changed as far as technical analysis goes, so the bulls need to put together back to back positive days and push this above that falling wedge formation to turn this ship around - at least for a short-term relief rally.




The DWCPF (S-fund) created two positive kangaroo tail formations below that consolidation box on Friday and again on Monday. You can see the descending resistance line, which is on most of the charts that we watch. That's what the bulls are facing now and what they must take out to avoid another leg lower at this time.




The monthly chart of the small caps, which goes back to the bottom of the bear market, shows the index trying to find support at one of the longer-term support lines (red) but if this wants to go down to the bottom of that parallel channel (blue), it may be testing that 1130 area, which would be a loss of another nearly 10% should that happen. Translation -- Monday's lows need to hold.




The EAFE Index (I-fund) is also churning near the lows trying to create a bottom.




The High Yield Corporate Bond Fund made a lower low yesterday and that was a bit discouraging with stocks moving higher at the open, but it too turned around and closed at the highs of the day. It's still in a downtrend and still below the 200-day EMA, so it's not out of the woods yet.




AGG (bonds / F-fund) was down again and it seems to have created another bear flag. The last one broke down and with the trend down, I don't see why this one won't eventually break down as well.




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

Tom Crowley


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