TSP Distribution: C-fund 50%, S-fund 40%, I-fund 10%
What a ugly week that turned out to be. The earning reports that were coming out the first part of the week were weak, so we had a big gap down Monday and then we consolidated the rest of the week. It appears that most of the reports to date are meeting expectations but their forecast for future earnings look weak. Below is quote from Money.com about earnings so far.
More than half of the S&P 500 companies have reported third-quarter financial results so far, and while more than 70% have delivered earnings above Wall Street's estimates, only 36% have topped sales forecasts, according to FactSet Research. That is well below the average of 55% that typically beat revenue estimates.
Last Tuesday, I made it official that we should bail to the safety of the G-funds or T-bills for all outsiders. I myself did not bail. If fail to consolidate here and reverse back uphill, I’m going to feel the fool for not bailing. But I have made the decision to ride until we close below $1406 on the S&P 500 and if that happens, the next day I will bail. We should have bailed from the S-fund to the G-fund or Small Cap to T-bills, last Tuesday. I will hold for now, but a close below $697 would be a punch out.
Before I talk to much here, let’s get into the charts and see how much damage has been done.
Above is the daily S&P 500 chart and inside that yellow circle is everything that is screaming bailout. If you decided to hangon with me, then you will like the sight of the yellow channel that appears to be consolidation. If we can stay inside this channel and eventually break to the upside, there is hope that the uptrend will re-start. I will not take anymore pain than a close below $1406 and I will bail to safety.
I made the post early Friday morning that if we were trading below $1406 by 11:45am, that I was going to bailout. We were safe at 11:50, so I closed the computer and went out to run some errands. At 12noon, we fell below $1406 and stayed there for almost an hour until we climbed back out of the death zone. To say that I was a little pissed off is putting it lightly. But this is the stock market an I should expect it to slap me around at times. So as you can see above, we are safe at $1411 for the moment.
The last thing I want to show that concerns the S&P is the longer term weekly chart. We had a nice Bull channel formed and we always want to breakout to the upside. After the close Friday, we broke below. Not only that, we confirmed a pivot high was created and that normally indicates lower prices in the future. Another warning that we might have to heed. Is there a positive here? Yes, the green uptrend line is still intact on the weekly chart. Second, no cross over of the 10 and 30 week moving averages.
The Small Cap above is breaking down and technically gave a sell signal on Tuesday. We are not as bad off here as the the S&P, but it is definitely a serious watch. If close below $697 here that will finish off the green uptrend line and should be the final straw for bailout. Lastly, we are oversold here, so a possible bounce to the upside is possible.
Can you believe the International index is actually holding up better than the S&P and Small Cap? It is true. This index is on a watch because we close to crossing some critical points, but as of Friday we are safe.
Conclusion: We really need some good earning reports next week to reverse this sentiment on the market. Right now it just feels so negative but sometimes when everyone is negative, things catch you by surprise and rush to the upside. We are oversold on a lot of the indexes so there is a reason for buyers to go shopping. Next the Nasdaq needs to stop going down and consolidate or totally reverse and start back uphill. It is leading the markets down and putting pressure on everything.
Unless we have a strong 3 day turn around next week, October is going to end up being a negative month, which is very unusual. If your out of the market, stay out. If you held last week as I did, you have your levels to watch. If they break, do not hold, get out. I will try my best to post all the way up to 11:45am every day if it is that critical.
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