TSP Talk Weekly Wrap Up – 3/10/12



Stocks experienced a long overdue pullback last week, but after two days of selling, the buyers stepped up and the S&P 500 flirted with new highs again.



For the TSP, the C-fund was up 0.14% last week, the S-fund gained 1.04%, the I-fund lost 1.00% as strength in the dollar put pressure on the international stocks, the F-fund (bonds) lost 0.23% and the G-fund was up 0.03%.



For the month, the C-fund is up 0.44%, the S-fund has gained 0.72%,the I-fund is down 0.82%, the F-fund is off 0.27%, and the G-fund has added 0.04%.

The S&P 500 looked like it was going to break down from the test of the 2011 highs. The selling on Monday and Tuesday of last week took the index down below the narrow rising trading channel and the 20-day exponential moving average - both negative signs - but it stabilized at the rising support line connecting the November and December lows. The fact that this new support lines runs parallel to the old rising channel is a good sign. It is basically the same trend, as far as angle of incline goes, but it is just wider.


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


I like to see 3 or more closes above a breakout point to have it confirmed so as long as the S&P 500 is trading below the 2011, it is still not out of the water. Ideally, the S&P will move above the recent highs and any pullback will remain above both the 2011 high and the new rising support line. If that doesn't happen I would expect the bears to come back and try to put pressure on stocks again.

Bonds (the F-fund) has been pulling back because the yields have been hitting the top of their recent trading range. Remember, when bond yields go up, the price of bonds and the F-fund go down. We'll be watching to see if this resistance line on the the yield on the 10-year T-Note holds near 2.06%.



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


If the yield starts to drop below 2% again we should see higher prices in the F-fund next week. If we see a breakout above the 2.06% resistance, it could a sign that bonds and the F-fund are about to breakdown.


The Dow Transportation Index, which is our market leader, rebounded last week of off its descending support line, but it is now facing the upper end of its trading channel, which coincides with the 20-day EMA. This will be a good test for the market this coming week. Will the leader back down from the resistance, or will the downtrend be broken?


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

The price of oil had been pulling back from its recent high but it seems to have found support at the December high, where it had broken out in February. This is a very bullish pattern (for oil) and if we start seeing $110 oil again it will put pressure on the Dow Transportation Index, and being that it is a leader, the rest of the market will likely be negatively impacted.


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


Oil and stocks tend to move together until we start getting extreme readings. It seems $110 may be that extreme to watch. $4 to $5 a gallon gasoline will likely be too much for consumers and could be a killer of the current economic recovery, which has already been weaker than most recoveries coming out of a recession.

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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