TSP Talk - Thrift Savings Plan Strategies

Market Comments

August 4, 2010

Current TSP Share Prices

Today's Commentary

One more obstacle?

Stocks opened lower on Tuesday, but they battled back most of the day closing just modestly lower as the Dow slipped 38-points.


For the TSP, the C-fund lost 0.48% on Tuesday, the S-fund fell 0.85%, and the I-fund rallied 0.63%, as the dollar fell yet again. The F-fund (bonds) gained 0.25% as yields fell back again.

I drew a parallel trading channel on the S&P 500 and I thought it was interesting that the index is pausing here at the upper end. To me, other than making a new high (above the April high), this is almost the final obstacle from the technical analysis viewpoint. We know that we have seen a new short-term upward trend, but a move above this resistance level could give the index an end to the intermediate to longer-term downtrend trend it has been in since the April peak.

The tricky part is, when you are at the top of a trading channel, you are either at the best place to sell, or at the start of a change in the trend from down to up, which would be a good time to buy. That resistance line would likely become support should it be taken out.

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

As always, I would want to see 3 to 5 closes above the line before officially declaring victory for the bulls but with the 50-day EMA trading back above the 200-day EMA, and the index trading above all of the EMA's (and 200-day SMA), it won't be tough to turn bullish... but not quite yet.
Being at the top of the channel, and having the MACD giving us a negative divergence, I am a little skeptical, particularly in the short-term, but the bulls are close to having most of their ducks in a row.

The yield on the 10-year T-note is still looking over a precipice as it tests that 2.9% area again. A break of yields to the downside would likely be in accompanied by a pullback in stocks. Triple bottoms do not hold as well as double bottoms.


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

If the 2.9% area does hold, it would be a green light for the market to break out above that trading channel.

I am reluctant to do much of anything, particularly with the July jobs report due out on Friday morning. We know that the economy isn't setting the world on fire, but is it going to flatten out or recede? With the GDP coming in at 2.4% last week, the employment picture is not looking very good. Even the Secretary of the Treasury Timothy Geithner, said we might expect to see higher unemployment numbers before we see them much lower. Estimates for the July report are for a loss of about 87,000 jobs, and an unemployment rate of 9.6%. As a reminder, June's unemployment rate was 9.5%.

But the stock market is a forward looking indicator and the jobs report is a rearview mirror indicator so I will believe the market.

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

Tom Crowley

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