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| Today's Commentary (Short Term Outlook) |
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How will the healthcare
bill affect stocks? We finally saw a little pullback in stocks on Friday as concerns over Greece resurfaced, and there were more indications that the healthcare bill may have enough support to pass. The Dow lost 37-points, which was well off the lows. For the TSP funds the C-fund dropped 0.51%, the S-fund, which led on the way up, lost 1.05% on the day, while the I-fund fell 0.42%. Bonds also closed lower dropping 0.05%. For more on last week's returns , please see our TSP Weekly Wrap-up. Of course we now know that the healthcare bill did get the support it needed and has just passed the House of Representatives as I write this on Sunday night. The overnight futures markets are reacting negatively to the news so far. We have been expecting, even hoping for a pullback in the stock market since everything was getting overextended and support was falling further and further below. The S&P 500 has now been down for two consecutive days, although the losses have been very modest. We welcome a pullback, or at least I do, and with the futures indicating at least a negative open for Monday morning, we have another set of questions...  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk My first question is, should I buy this pullback or is something a little more severe about to commence? We have some very strong support in the 1145 to 1150 area on the S&P, which would be an area to consider being a buyer. Although it is not shown on the chart above, the 20 and 50-day EMA's are sitting at 1138 and 1120 respectively. Those would be the next levels of support to potentially buy. If the market does open negatively on Monday, then the steep trading channel trend in the Russell 2000 will likely break and support is quite a way down. Small caps led the way up and they may also lead the pullback down.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The dollar found some support at the 50-day EMA and if it is going to resume trading in the ascending trading channel, could be looking at push toward the top of that channel. We know this would have a negative impact on the international stocks of the I-fund, but it could also hamper the rally in U.S. stocks. The rally in the dollar on Friday was strongly a result of the renewed concerns for Greece, which I continue to believe is not going away any time soon.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Now, we likely have a new healthcare system in this country and its impact on the stock market remains a question mark, but I have to believe that a small piece of capitalism dies when this bill becomes law. I will be very curious to see how the market reacts this week, after the initial seemingly negative reaction the futures are showing [Sunday night]. Of course many times negative overnight futures turn into positive trading days, so it's too early to say how investors will react. We have great fundamentals in the charts and I would expect the bull market to resume after any small pullback, but this healthcare bill / law could change that. I hope not. I really hope that any short-term selling caused by this bill passing is simply creating a buying opportunity. But if we start seeing support being taken out on the charts, we'll know it could be more than that. Thanks for reading. We'll see you back here tomorrow. Tom Crowley |