TSP Talk - Thrift Savings Plan Strategies

Market Comments

February 17, 2010

Current TSP Share Prices

Today's Commentary (Short Term Outlook)

Breakout or fake-out?

After breaking an 8 week streak of positive Monday's last week, the market came back with a big 2% gain yesterday, making it 9 of the last 10 Mondays (or post holiday Tuesday) being positive.

The Dow closed up 170-points and for the TSP funds, the C-fund gained 1.81%, the S-fund was up 1.68%, and the I-fund led the way with a gain of 2.36%, with the help of a weaker dollar. The F-fund was also positive at +0.15%.

The high end of resistance areas that we talked about last week for the S&P 500 (1100) and the Dow Transportation Index (4000) are starting to come into play. I'm a little surprised that the indices have been able to make it here, but the markets always seem to move further than you might expect.

The S&P 500 closed near 1095, while the 50-day EMA is 1097. That is an important level for the bulls because if the S&P can move above the 50-day EMA for 3 or more closes, we will probably have to put the correction talk behind us and expect another leg higher. I am not expecting that to happen, but I have been wrong many times before and I'll have to adjust accordingly if I am wrong this time.

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

It is interesting that the S&P 500 is giving different signals depending on the timeframe you are viewing. As we said above the market is near a make or break area as 1100 is an important level for the bulls to take out.

But if you look at a weekly chart of the S&P 500, there is a strong PMO sell signal for the intermediate-term. Take it a little further, and you can see below the weekly chart, the monthly chart is showing a strong long-term PMO buy signal in the S&P 500.

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

So, buy and holders have their assignment - hold. But market timers have to determine their timeframe before acting. The short-term looks mixed, the intermediate-term looks "toppy", but the longer-term looks pretty good as far as PMO signals go.

The VIX had moved up near 30 during the test of the 200-day EMA several days ago, but it has pulled back to the 22 level since. If the recent trading channel continues to run parallel , there is a possibility that the VIX may have bottomed here. It looks like 2 bull flags to me.

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

As a reminder, the higher the VIX reading, the more "fear" is in the air. When fear gets extreme, it can be a good time to consider buying. As the VIX gets lower, complacency could mean a pullback is due. This is a generality and nothing set in stone. You can see above that the VIX can get very high before the market bottoms.

I showed you this yesterday but I wanted to point out that the NYSE overbought/oversold indicator moved above the +500 level. During a bear market, this is usually a place for the market to find problems moving forward. During a bull market however, we are more likely to see readings near +1000 before the market takes a break.

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

Except for perhaps the weeks surrounding Christmas, seasonality is rarely a primary indictor, but I wanted to point out how positive the 11th trading day of February is historically, compared to the 12th trading day. Tuesday was the 11th trading day in February and today is the 12th.
                                    Chart provided courtesy of www.sentimentrader.com

Historically, the next 5-days are all negative more often than they are positive. The 31% positive readings for the 12th and 14th trading days in February, are about as low as it gets all year.

That's all for today. Thanks for reading. We'll see you back here tomorrow.

Tom Crowley

TSP Talk is in no way affiliated with the U.S. government, or military TSP Thrift Savings Plan, tsp.gov, or any other government agency. TSP Talk does not guarantee the accuracy or completeness of this report, nor does TSPtalk.com assume any liability for any loss that may result from reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice and are for general information only. The information contained on this website is for educational purposes only and not intended to be recommendations, and may not be published, broadcast, rewritten or otherwise distributed without prior written consent from TSPtalk.com.