TSP Charts: TGIF

By Michael Bond on July 24, 2015

The stock market is approaching a level that may require the New York Stock Exchange to “break” (wink, wink) again. The level equals the market low on 11 March and 8 July. Penetration of the 11 March low would present a negative technical picture for the market – a lower low and after four months of sideways action. Of course we all know the markets are not manipulated. But the market action on the 8 July was interesting.

New York Stock Exchange approaching critical support levels

On 8 July as the NYSE index approached its 11 March closing price of 10678 the market temporarily broke. It reset slightly higher after being “fixed”, then it started to decline again and as it approached 10678 again it conveniently broke and reset higher once again upon being “fixed”. It then declined in earnest and once it penetrated the 10678 level, where I am certain many stop-loss orders were waiting to be executed, the market broke for about 4 hours.

Luckily overnight, the Chinese outlawed short selling in order to stop their stock market crash leading to global market relief rallies the next day. Then the Greece bailout can got kicked down the road again and a new rally was underway. That rally was unable to establish new highs and here we are again today.

S&P 500 equal weight

The S&P 500 index (TSP C fund) has not broken to a new low and but the S&P 500 equal weight index is below its March 11th close and approaching its 8 July low. The equal weighted index represents the action of a majority of the companies within the index. Its weakness is also evidenced by the S&P 500 Bullish Percentage Index which is currently at a new low. This simply means the number of S&P 500 companies with bullish charts continues to decline. In other words, the S&P 500 index (TSP C fund) is being held up by fewer companies with large market capitalization (Apple, Amazon, Google, etc.)

The NYSE Advance Decline Volume Index has now set a new low and since price typically follows volume, a new low in the NYSE early next week would not be a surprise. As mentioned the broader NYSE price index is within half a percentage of ~~needing to break~~ critical technical support levels where a rally should ~~be engineered~~ occur.

All joking aside. The market internals remain weak and I am seeing increasing levels of risk aversion that typically point to deeper market corrections. The broader market needs to hold support and market internals need to improve for the TSP funds to establish new sustainable highs.

My near term concern remains on watching market cycle indicators in order to determine if the deeper correction I suspect to see this summer is just that – a correction – or the beginning of the next bear market. As for the markets, thank goodness it is Friday and the NYSE did not need to break – yet.

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