It would be quite easy for TSP members to be misled by today’s market action. While the major indexes faired OK if we look deeper the market doesn’t look quite as healthy.  It is important for readers to understand that typically during the last week of a quarter, large institutions will pile into winning stocks so that their marketing material for the next quarter will reflect their brilliant stock picking, regardless of how long they held the position. This tactic is called window dressing and typically supports the broad markets as a quarter comes to a close. I suspect this is what we are seeing now, which is keeping the indexes from reflecting the real health of the market.

A closer examination of today’s action displays that once again, oil crept higher causing oil stocks to share the lead today in addition to gold. Unfortunately, this is not the leadership we like to see in a healthy market and is our first hint to raise our trust levels. Breadth, which measures the number of individual stocks advancing verses declining, was negative both in the NYSE and NASDAQ 100 today while the more narrower, DJIA which is made up of bigger cap stocks was positive. This was probably caused by window dressing efforts in larger cap stocks. This is not action indicative of a healthy market. 

Most importantly, the overall technical picture of the general market remains severely damaged while all three major indexes remain below their 50 day moving averages and only the NASDAQ 100 is trading above the 200 day moving average. The NASDAQ has significant support at 2100 which we must watch carefully.  Most average investors would increase their returns dramatically if they simply respected these critical technical levels.  

In a drifting market, many may be tempted to jump in, simply because stocks are less expensive than they were a couple of months ago. History and experience has taught us, that this can be an expensive lesson as stocks can always become even cheaper.  Don’t try to impose your feelings of what is a ‘reasonable’ pullback on a market that is seldom logical. 

 If your caution levels have not been raised, today may be a good day to reconsider. If and when the market does pursue a sustainable advance, we will have ample opportunity to participate. Until then we must remain in capital preservation mode awaiting a better day.

 Have a good evening.

 RevShark