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TSP Talk – Consolidating

Despite a series of strong economic reports, the stock market is still almost completely focused on the situation in Europe; moving up and down with every headline coming out of the EU meetings.

On Thursday and Friday the Dow flip flopped on a couple of nearly 200-point days as the news out of Europe was disappointing on Thursday (-199) and more positive on Friday (+187).

For the TSP, the C-fund gained 0.92% on the week, the S-fund was up 0.64%,the I-fund added 0.30%, while the F-fund (bonds) made 0.15%, and the G-fund was up 0.03%.

For the month, the C-fund is up 0.71% in December, the S-fund has gained 0.47%, the I-fund has lost 0.36%, while the F-fund (bonds) is up 0.27%, and the G-fund had made 0.04%.

Let’s analyze the chart of the S&P 500 and see where this index may want to go next.

Thursday’s big 2% sell-off took the S&P down to the 200-day EMA and back to the top of the big bull flag (in red) and it appeared that we might see this chart rollover, but the 200 EMA held and that old descending resistance line became support once it was broken, which is just what you want to see after a breakout – a test of the old resistance.

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

The fact that the S&P is trading above the 20, 50, and 200-day EMA’s, and the 200-day EMA is now rising, puts be on the bullish side of this volatile market, but you can see how close together these EMA’s are right now, and we are one sharp sell-off away from movng back below all of them, so my bullish conviction is someone fragile.

A longer-term view shows the wild swings we have endured this year, and also shows the obstacles in the way of any potential upside move. There is a longer-term trend line coming down from previous highs, and that will be tough to crack, plus the 200-day simple moving average (SMA) is also getting in the way.

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

On the lower end, the 200-day exponential moving average (EMA) is acting as support. The difference between the two moving averages is that the EMA’s puts a higher weighting on recent prices where the SMA takes the latest 200 closing prices and divides by 200.

I use the 20, 50, and 200 day EMA’s, but when we start trading near the 200-day EMA I like to see what the 200-day SMA is doing as well. Many traders are looking at both and they can sometimes act as self-fulfilling prophesies since traders will buy on dips down to these MA’s, and sell when they reach up to one. One of the two 200-day moving averages is likely going to give soon, so place your bets.

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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