Monday, August 30, 2010

General TSP Discussion.

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SgtWs

Monday, August 30, 2010

Post by SgtWs »

What a frustrating market this has been. During the market rally on Friday I received about five emails asking WTF? Last week after breaking down through major support levels at 1060, the S&P 500 (C Fund) was saved by support at the 1040 level and then managed to rally on Friday. But overall the major indices remain in a downtrend pattern on the charts (I will elaborate more in a second).

After the close on Friday many seemed excited and upbeat like something really positive had occurred in the market that has changed everything. I'm not a perma-bear, but I think it is prudent to caution everyone to be careful in your conviction that we did hit the bottom. Let's recap the week. I think that to see where you are going it is important to remember where you've been.

Positives

1) Initial Jobless Claims 17k less than expected at 473k and down from 504k last week
2) ABC confidence at 6 week high, UoM confidence slightly weaker than expected but up a touch from July
3) Q2 GDP better than feared but still weak
4) Bernanke elaborates, doesn’t lower 2011 GDP forecast
5) Refi’s rise to most since May 2009
6) Ireland has good bill auctions, albeit very short term maturities
7) German IFO highest since June 2007, consumer confidence highest since Oct 2009
8) UK retail index strong
9) Housing stocks and INTC shrug off bad news and AAII has bulls at lowest since Mar ‘09.

Negatives

1) CDS and yields in PIIGS moving higher again
2) Italian consumer confidence lowest since Mar ‘09
3) Existing and New home sales awful
4)Durable Goods weak with non defense cap goods ex aircraft down 8%
5)PC sales slowing.

The Charts: Last week I threw in the towel when the S&P 500 broke through the important support level of 1060.

Image

S&P 1060 was the line in the sand I drew for myself as the level of where I couldn’t stand the pain any longer. It was also a pivot low earlier in July and with S&P falling below this level it negates the pattern of higher highs and higher lows. Despite the strong close at the end of the week, in my opinion, the S&P remains vulnerable to further declines.

This is a very difficult market for anyone that chooses to participate. This market could continue to bounce higher and expand the range of our recent range bound market, or it could just as easily go lower. I am afraid to bet either way, but there is a clear trend of us now reaching lower lows. At this point I have decided to wait for a clear since of direction from this market.

My Doom and Gloom

So why did we have the strong rally on Friday? Was a reaction of contrarians to the investor sentiment report, or Ben’s words?

The economy is clearly getting weaker, and the rest of the year is sure to be just ho-hum at best. We just revised 2nd QTR GDP downward and will probably have to revise the 3rd QTR downward too. To me it seems we are clearly in a recession, and possibly headed for a depression. Calling me crazy? Well, let’s explore. In economics, a depression is a sharp, protracted downturn in economic activity, usually crossing borders as a worldwide event. Ringing any bells? It is more severe, and usually longer, than a recession, which is seen as a more-or-less normal feature of the business cycle. Depressions are usually associated with large collapses in business, bankruptcies, sharply reduced trade, very large increases in unemployment (I know we are saying 9%, but the real number is projected to be much, much higher), failures in the banking and credit system, and a general crisis mentality and panic among the population, big corporations, and policy makers (we are starting to see this now). Depressions can cause severe economic dislocations including deflation (that argument is coming up more and more), and the wholesale demise of certain industries.

And look, all Ben really said was that the Fed was ready to take additional steps to prevent a second recession, if the economy deteriorates further. But he stopped short of promising any action. The Fed "will do all that it can to ensure continuation of the economic recovery," he said. He says he has the tools to bolster the economy if needed, but he doesn’t really elaborate on what that plan is. My guess is that is because it will scare the hell out of us and cause the markets to crash. He has speculated that the Fed might buy more securities as a way to drive down interest rates, hoping this will spur spending. But I can’t find what he said that everyone got so excited about? And no one is arguing that unemployment will go lower any time soon. I also think next quarter’s earning season will be disappointing as corporate America has just about propped up earnings as far as they can by laying people off.

I’ve got a lot of stuff I want to share on Monday and Tuesday…..so stand by…..but first……..

I am pretty active on TSP Center and find it a dynamic tool for TSP investors. To calculate my returns on TSP Market Watch when they are being done automatically on TSP Center is redundant, so from here on out I will just utilize TSP Center for tracking my returns. Besides, you should be following the leaders there any ways. Also, due to an serious illness in the family, I may not be able to make posting every day, but I will be out there sharing whatever I may find.

I found this site a lot of fun………

The US Misery Index- The misery index was initiated by economist Arthur Okun, an adviser to President Lyndon Johnson in the 1960's. It is simply the unemployment rate added to the inflation rate. It is assumed that both a higher rate of unemployment and a worsening of inflation both create economic and social costs for a country. A combination of rising inflation and more people out of work implies a deterioration in economic performance and a rise in the misery index.

Current Misery Index (10.74) = Unemployment rate (9.5) + Inflation rate (1.24)

User avatar
jeffvan1
Posts: 491
Joined: Tue Feb 12, 2008 5:04 pm

Post by jeffvan1 »

Bulls will mount a massive defense at S&P 1010. Look for an uptick on Monday. Mkts are short-term oversold.

SgtWs

Markets.......

Post by SgtWs »

I think you are right about tomorrow. Everything seemed so rosy on Friday.

So you think we go higher short-term, and then drop to S&P 1010 where the bulls will dig in?

crondanet5
Posts: 4330
Joined: Tue Aug 19, 2008 8:51 pm

good luck with the illness

Post by crondanet5 »

It's 2024 EST on Sunday night and I'm trying to fit Jeff and your comments together with the weirdest pre-market for the Dow and nasdaq. And how about that Nikkei? Could be an interesting Monday on the markets.

User avatar
flight23
Posts: 1342
Joined: Mon Jul 26, 2010 10:47 am

Post by flight23 »

Interesting = Good day to watch from the sidelines.
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FundPriceDayYTD
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F $19.08 -0.06% -0.74%
C $82.21 0.11% 10.55%
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I $42.57 -0.24% 5.95%
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L2055 $16.39 0.02% 8.38%
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L2035 $14.34 0.02% 5.79%
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