TSP Talk - Thrift Savings Plan Strategies

Market Comments

August 24, 2010

Current TSP Share Prices

Today's Commentary

Don't say you weren't warned

Stocks bounced around quite a bit yesterday, but some late selling saw the indices finish near their lows of the day. The Dow closed down 39-points.

For the TSP, the C-fund lost 0.40% on Monday. The S-fund dropped 1.06%, while late weakness in U.S. stocks, and late strength in the U.S. dollar did not show up in the I-fund yesterday it was able to hold onto a 0.35% gain. The F-fund (bonds) added 0.07%.

The current negative signs we are seeing on the chart of the S&P 500 are so blatant, that it seems almost too obvious. The series of head and shoulders patterns is a big warning sign. We have a PMO sell signal. We are in August / September trading, the worst two months of the year historically. And now we have another death cross as the 50-day EMA is back below the 200-day EMA, putting the S&P 500 back into a bear market "officially" after just a few weeks of being in a bull market.

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

Oh, and we had a 2nd Hindenburg Omen signal given on Friday. It is basically a set of criteria that precedes major sell-offs, or even a crashes. I'll let you read about it yourself if interested because, as much as I like to read stuff like that, I don't know how much credibility to give it. I will say that every major crash of U.S. stocks since 1985 was preceded by a Hindenburg Omen signal. That has my attention.
As I said, we are seeing almost too perfect of a sell signal setup, but if this market starts to accelerate to the downside any time soon, don't say you weren't warned.

I will again point to the 2007-2008 bear market to show the longer-term head and shoulders patterns we were seeing back then, and you probably remember the results were pretty disastrous as the S&P 500 went from 1570 to 666 from top to bottom during that bear market.

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

By the way, the last Hindenburg Omen signal came in 2008. Like many indicators in trading, when so many people are talking about one particular signal, you tend to see it become less effective, but with all of the other ominous signs we are seeing, I am certainly not going to completely dismiss the possibility of a crash.

The new "official" bear market signal given by the exponential moving average crossover will affect this week's TSP Talk Sentiment Survey System signal as the buy / sell ratios change back to bear market rules.

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

Tom Crowley

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