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Market Comments September 3, 2010
Current TSP Share Prices

Today's Commentary

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Can we trust this rally?
After bouncing around between positive and negative for several hours, stocks rallied sharply during the last couple hours of trading. The Dow gained 50-points, but percentage-wise, the broader indices did even better.

For the TSP, the C-fund gained 0.91% on Thursday, the S-fund was up 1.27%, and the I-fund added 0.43%. The F-fund (bonds) slipped 0.10%.
The S&P 500 pushed up toward the 200-day EMA (1092) and the upper end of the longer-term downtrend resistance line (~1105), not surprisingly, on light volume. While the action has been impressive, it gets tougher from here - particularly next week.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The NYSE overbought / oversold indicator hit +471. We have found that bull market rallies are able to push this indicator up to the +1000 overbought level, but during bear markets, the +500 area is where the indices find some trouble. Officially, we are in a bear market as the S&P 500 is below the 200-day EMA, and more importantly, the 50-day EMA is below the 200-day EMA.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I have posted this long-term (2007-2008) chart a couple of times this week to show why I believe this rally could be a trap. These large head and shoulders patterns are very bearish, and you will notice that prior to the breakdown of the H&S patterns during the bear market, there was a sharp rally that turned out to be a trap.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
In addition, pre-holiday week trading is very often reversed the week after the holiday. To me, this adds up to a possible fake-out rally this week, and while only time will tell, I think buying right here may be a mistake. If the downtrend is eventually broken, I would rethink the situation. But for now, i am looking at this as a temporary bear market rally.
This morning we get the August jobs report. The latest estimates are for a loss of 120,000 jobs, a gain of 44,000 private sector jobs, and an unemployment rate of 9.6%.
Thanks for reading! Have a great holiday weekend!
Tom Crowley Here is the historical chart surrounding labor Day Weekend:
Chart provided courtesy of www.sentimentrader.com

Friday is the 3rd trading day in September:

Chart provided courtesy of www.sentimentrader.com

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Quotes

[ F ]

S&P 500 (C fund))

1d 5d 3m 6m 1y 2y

Dow Completion (S fund)

1d 5d 3m 6m 1y 2y

EFA (I fund)

1d 5d 3m 6m 1y 2y

Bonds (F fund)

1d 5d 3m 6m 1y 2y

20min. delay http://finance.yahoo.com

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TSP Talk - Thrift Savings Plan

TSP Talk -
Thrift Savings Plan