TSP Talk – 05/05/12 » Community

Red flags

Stocks started to drift lower on Thursday of last week, on jitters over the impending jobs report. Friday’s jobs report justified investor’s nervousness as it came in lower than expected and and stocks sold off sharply ending the week on a sour note and sending all of the TSP stock funds into the red for the week.

For the TSP funds, the C-fund lost 2.41% last week, the S-fund dropped 3.55%, the I-fund fell 3.03%, while the F-fund (bonds) gained 0.32% and the G-fund was up 0.03%.

Here are the final monthly numbers for April is you missed them:

Friday’s action caused the S&P 500 to once again break below the longer-term rising support line and 50-day EMA. These are normally pretty big warning signs, although last time this happened, the index found support pretty quickly and regained those broken levels. I’m not saying that will happen again, but it is not uncommon to see a strong reaction to a jobs report get reversed in the coming days.

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

In 2011, the S&P 500’s high of the year was hit on the first trading day in May. Things went a little sour after that as the old “Sell in May and go away” axiom would have worked very well. Not surprisingly we heard that phrase being tossed around a lot this spring. The question is, will the high on the first trading day in May 2012 be taken out at some point, or will it be a peak like in 2011?

Last week we showed that the Dow Jones Industrial Average (the “Dow”) was testing the upper end of the new rising trading channel and the the prior 2012 high.

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

Here is it now testing the lower end of the trading and the 50-day EMA. Not normally the leader among U.S. indices, but this chart could be telling the technical analysis story for us right now. Keep an eye on the 13,000. Should that break, it may be the final red flag for us.

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