TSP Talk – Post Ben

From Monday 8/29 morning’s TSP Talk market commentary:

Stocks opened sharply lower on Friday but investors seemed to find some positives from the Fed after the Ben Bernanke speech in Jackson Hole, WY.

From Reuters on Ben Bernanke:
“Although he said the Fed would consider what more it could do to boost growth — comments that helped push up U.S. share prices — he stopped short of outlining new moves, unlike his Jackson Hole speech last year that was seen as opening the door to a second round of massive bond buying.”

For the TSP, the C-fund was up 1.53% on Friday, the S-fund jumped 2.60%, the I-fund gained 0.92%, and the F-fund (bonds) added 0.19%. For more on the weekly and monthly returns, please see our TSP Weekly Wrap-Up.

The S&P 500 lost ground on Thursday last week after hitting the 20-day EMA but now, with the futures sharply higher as I write this on Sunday night, it looks like it will take another shot at on Monday morning. The pennant formation has a tendency to break down if the prior trend was down – which it is, but look for a possible fake-out move above the resistance before any drop.

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

We saw a similar move in early 2008. The pennant broke to the upside for a day or two, but headed south shortly thereafter before the index went down to test the lows again.

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

Of course anything can happen, particularly during a light volume pre-holiday week, but I am expecting something similar to what we see above. The question will be whether the test of the lows hold like they did in ’08, or if we get another leg down.

The Nasdaq filled the open gap last week, and is now finding resistance at the top of the open gap. If the strong futures hold overnight (on Sunday) we should see that resistance break, but just above that area is the 20-day EMA. More resistance.

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

The NYSE overbought / oversold indicator is modestly in overbought territory with some room to move higher, but the peaks are sloping downward so early this week we could see a bounce, then some resistance.

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

Here comes Labor Day and September. This chart is a few years old but still contains 55-years worth of data. It shows that the trading day 5 days prior to Labor Day weekend is typically weak, but that would be today and the early futures prices are not indicating that. Of course we have seen some big intraday reversals over the last several days and week.

Chart provided courtesy of www.sentimentrader.com

The Friday before the holiday seems to have the best track record, with the days following the holiday less than exciting, but if you recall last year we had a very strong rally start a couple of days before Labor Day weekend, and go for several months.

Historically September is the worst month of the year as far as how often it is positive, so perhaps last year’s strength was the fluke?

Chart provided courtesy of www.sentimentrader.com

The TSP Talk Sentiment Survey came in at 42% bulls, 44% bears for a bulls to bears ratio of 0.95 to 1. That is a neutral reading using the current the bear market rules, which means the system will remain 100% in the C-fund for this week.

Thanks for reading! Our market commentary is updated daily on TSPtalk.com.

Tom Crowley

The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. 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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