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TSP Talk Market Commentary 02/26/2020

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There was no Turnaround Tuesday for the market as stocks continued their slide yesterday. We flirted with the possibility of back to back 1000-point losses for the Dow, but it managed to stay within triple digits yesterday. The damage was broad and it may be getting overdone, but you still need to be careful with the VIX up so high. Triple digit moves are probably here for a while - up and down.

Daily TSP Funds Return

Well, the market did it again. I go out of town for a couple of days and boom! I'm not sure why, but that is not the first time that happened, and I don't take a lot of days off in general. Crazy stuff and reminiscent of December 2018 when we last had the Volatility Index hit 30.

It can be fun or disturbing, depending on how you've played it. The warnings signs were there, but the market has been ignoring warnings signs for quite a while now, and making new highs while mocking the bears. But like the boy who cried wolf, eventually the wolf shows up and you can understand why some may not have believed him.

Now we are set up for a lot more fun and it could get whippy out there. We had our first case of a strong open fail yesterday so clearly the character of the market seems to have changed, and we could be facing a period of "sell the rallies" where "buy the dips" had been working for so long.

Then, just to add more fun, we'll like get a big rebound that could last days or even weeks, and you'll get the urge to buy into it, only to have the market rollover and test the lows again. But they can be playable if you're nimble.

One interesting thing that has happened this year is that the indices have made repeated all-times highs in both January and February, yet it looks like both of the first two months will end with losses - barring a big come back in the next three days.

If you're a buy and holder, you've probably been down this road before and you know how it goes. If you're a market timer you do have to be careful. The action can be opportunistic for us traders, but don't let emotions get in the way. The market will likely try to get you to lean the wrong way.





The S&P 500 (C-fund) gapped down on Monday leaving that huge open gap that will eventually get filled. But in the meantime the chart has deteriorated and you have to be careful. A buying opportunity is close at hand, but that doesn't mean the first rally is going to put in a bottom. We could easily rally, retest to lows, and that doesn't have to hold. I think it probably will, but it doesn't have to. And this isn't something that will resolve itself overnight. Be patient. The 200-day EMA is about 50-points below yesterday's lows.




The weekly chart shows some decent support near yesterday's lows, but it's possible that we need to see this break to get a real capitulation reversal. If the dip buyers are still salivating over the lower prices, it may not have gone low enough.




The DWCPF (S-fund) took another 3.35% haircut yesterday and you can see how quickly it has come down to test the 200-day EMA, where there is also a small open gap that may like to get filled. The steepness of the sell-off means it is unlikely setting up a "V" bottom.




The EFA (I-fund) has fallen below the 200-day EMA and a lot of that had to do with its chart deteriorating several days or weeks before the U.S. indices, because of that constant pressure from the rally in the dollar this year. It's now down 7% for the year.




The yield on the 10-year Treasury made another new low yesterday...




Surprisingly gold was down on the day. Normally a safety play, investors stayed away for a day, but it had been up 7 days in a row before yesterday so I'll cut it some slack.




The AGG (bonds / F-fund) rallied again and made another new high. This safety trade is working, but like gold, may be due for a rest.




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

Tom Crowley



Posted daily at www.tsptalk.com/comments.php

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.

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S&P500 (C Fund) (delayed)

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

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

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

(Stockcharts.com Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes