TSP Talk – 07/07/12

Weak jobs report takes away weekly gains

It was a typical holiday week where stocks climbed almost effortlessly before the holiday, but reversed direction after the holiday.

Here are the TSP fund returns through the week of July 2 – July 6.

The difference with last week’s holiday trading was that the holiday was mid-week as opposed to a 3-day weekend. The reason that makes a difference is because the post-holiday action came on light volume because many folks took Thursday and Friday off. That made the marker easier to push around so the weak jobs report may have been met with some overreaction.

The chart of the S&P 500 shows that overhead resistance held and now it will time to see if the support lines hold up. The 20-day EMA is back above the 50-day EMA for the first time since early May, which is generally a positive, but that can also indicate a short-term overbought market that needs a little rest before resuming its uptrend.

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

The market was certainly overbought leading into the holiday so a pullback was not a surprise. But add to that some bad economic data and light volume trading and we get a 1% decline.

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

This coming week will kick off the 2nd quarter earnings report announcements and since the market rallied strongly in June and into July, there is a tendency to see a “sell the news” reaction, even if the reports are positive. The question for us will be whether any pullback can and should be bought, or if we should step aside and wait for the dust to clear.

As always, keep an eye on the support and resistance lines and how the market reacts if the indicators move from overbought to neutral or oversold. A strong market won’t get very oversold before reversing back up.

Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.

Tom Crowley
Weekly Wrap-Ups Archive
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The legal stuff: This information is for educational purposes only! This is not advice or are commendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.

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