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| Today's Commentary |
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Breakout Stocks opened sharply higher on Wednesday, but then doubled the gain after a positive ISM report. By the close the Dow had jumped 255-points. For the TSP, the C-fund jumped 2.97% on Wednesday, the S-fund gained 3.45%, and the I-fund made 2.83%. The F-fund (bonds) fell 0.30%. As we have been saying, this late summer, pre-holiday week trading is usually accompanied by light volume and the indices can easily be pushed around, and that's what was happening yesterday as something like the normally benign monthly ISM report could move the Dow 100-points within a minute or two.  Unfortunately, the week after the holiday tends to see a reversal, so we will see if this rally has any follow-through today and/or Friday after two important employment reports, and if the gains hold next week as well. The S&P 500 did finally close that open gap - and then some. The recent downtrend was broken, but the descending longer-term trend and falling EMA's loom as resistance above.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk We obviously got the breakout from the consolidation rather than the breakdown. We knew it would likely be a sharp move. We just didn't know which direction, but again, these pre-holiday moves may be a fake-out so I will remain cautious.  Again, we may have seen the break out of the recent short-term downtrend, but the longer-term trend remains down...  I will repeat what I said yesterday, there can be short, sharp rallies up toward that upper resistance before the H&S pattern breaks down like we saw in 2007-2008, so I am not ruling out a possible move up toward 1100, even if this H&S eventually breaks down. Yesterday's rally may be the start of that sharp that will try to suck us in.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk It is all adding up to be a possible fake-out, but the market rarely plays out exactly the way I think it will so I will not be surprised if I am completely wrong - just disappointed that I would have been on the wrong side of the move. In this case missing a potential move to 1100. The dollar has formed an inverse head and shoulders pattern (H&S) and appears to be attempting to test the 200-day EMA, and / or the middle of the head of the H&S.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk If this is instead a breakdown of the dollar, I will be more inclined to believe the rally in stocks. Today we get the weekly initial jobless claims report, the last one before Friday's monthly jobs report. This pre-holiday week may have more fireworks in store for us. It is easy to get emotional when the market is rising or falling 2% to 3%. I even briefly considered using one of my September IFT's to buy into the stock funds after the seeing the rally. But I reread my commentary, which I write when the market is closed, and I realized that I expected some irrational market activity this week, I saw the possibility of a short-term move to 1100, and I also expected it to eventually fail. So why should I change my outlook when the market is jumping? Only time will tell if trying to acting rationally will pay off. Now if you want to gamble to try to catch the rest of the move to 1100 (assuming it comes) that's one way to go, but it's risky. Thanks for reading! We'll see you back here tomorrow. Tom Crowley Here is some seasonality chart for September and the holiday: .  Chart provided courtesy of www.sentimentrader.com Returns-wise, September is actually the worst month of the year, historically. At least it was between 1950 and 2005.  Chart provided courtesy of www.sentimentrader.com |