TSP Talk - The bear flag remains intact


Apparently the market does not read our weekly wrap up as we were expecting a breakdown of the bear flag (see below) and a test of the August lows to begin last week. Instead, the market rallied for 5 consecutive days, which was the first time that had happened since late June.

For the TSP funds, the C-fund gained 5.41% on the week, the S-fund jumped 5.53%, the I-fund was up 3.27%, while the F-fund (bonds) lost 0.51%, and the G-fund was up 0.04%.

The returns for the month of September improved dramatically but all of the stock funds are still in the red. The C-fund is now down just 0.13%for the month, the S-fund has lost 0.83%, the I-fund is still down 5.59%, and that has a lot to do with the recent strength in the dollar, the F-fund is up 0.44%, and the G-fund has added 0.08%.

The bear flag is still intact on the S&P 500 chart, but the 50-day EMA (exponential moving average) may give it some trouble this week. In a bear market the indices tend to have a difficult time getting back above the 50-day EMA for any length of time.


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

The chart from the 2008 - 2009 bear market shows this struggle.


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

Many of our indicators, which have been very oversold and seeing too much pessimism from investors, are off of the extreme readings after this rally. Some of the longer-term indicators are mixed. Some are indicating that the lows should hold in the 1100-1120 area, while others are looking for another leg down for the market. The short-term indicators are more overbought and are looking for a little resistance in this area this week.

This week will be a good test for the market as the S&P 500 tests the 50-day EMA (~1217) and should it break above it (something I would be surprised to see) the next test is in the 1250 area where the 200-day EMA meets the top of the bear flag.

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

Tom Crowley
www.tsptalk.com
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