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| Today's Commentary |
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Oversold bounce The stock indices headed south at yesterday's open but climbed back for much of the day, and closed with modest gains. The Dow finished with a gain of about 20-points on the day.  For the TSP, the C-fund was up 0.34% on the day, the S-fund jumped 1.07%, while the I-fund lagged, losing 0.29%. The F-fund (bonds) lost 0.10%. The S&P 500 made a lower low yesterday before closing up 3.46 points. The low hit a few key support areas - one is the support line created near the May and June lows, possibly making a right shoulder of an inverse head and shoulders pattern. That's the potential positive outcome out of this. The other support is the lower end of the recent short-term descending trading channel. That narrow trading channel is a few weeks old and since it is heading sharply lower, that is the immediate concern for the bulls - can this trend be broken?  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk As I mentioned yesterday, there is a new open gap open between 1063 and 1067 so, combined with the upper end of the sharp trading channel, the 1067 area may give the market some trouble on any attempted rebound. There is a lot going on in that chart and there can be cases made for both the long and short side. Taking in the whole picture, it looks negative, but with many indicators getting stretched to the oversold / overly bearish side, a snap back rally is not out of the question. We still have that dreaded Hindenburg Omen signal to worry about, which has preceded every market crash since 1985, and 77% of the signals preceded sharp sell offs. If there is a silver lining to this signal, I saw it mentioned on the Drudge Report and the Glenn Beck program this week. That could be a sure sign that this signal won't work this time. When your hair dresser starts giving you stock tips, it usually mean the market getting ready to peak, or if your mailman tells you you should get out of the stock market completely, it is the sign of a bottom. (Unless, of course, your mailman reads TSP Talk.  ). This
"mainstream" discussion of the Hindenburg Omen seems a little too
much to me.
I won't dismiss it, but I am a little skeptical this time.This is an old chart but is spans 55 years. The Friday before Labor Day weekend has done well historically, and the week after is weaker than a random week.  Chart provided courtesy of www.sentimentrader.com
This morning we get
the initial jobless claims
report, which has become a big market mover lately as it is a precursor to
next week's monthly jobs report for August. Last weeks data came in
weaker than expected and the market sold off. Estimates are looking
for 485,000. |