Last week was a holiday shortened week and we went into Friday with
just minor losses in the stock market, but as you may have heard, the
May jobs report came in well below expectation and stocks sold off
sharply. If you missed it, estimates were looking for an increase of
150,000 jobs and we got less than half of that, plus the unemployment
rate ticked up to 8.2%.
Here are the TSP fund returns for the week of May 21 through 25.
And here are the final returns for May...
emotional selling after a jobs report is tough to judge. Many times
the market reverses the week after a big reaction to the report, but the
economic data has been troublesome lately and of course there is still a
mess in Europe, so investors may wait for a reason to buy rather than
blindly go in and try to pick up bargains. That said, buying when
things seem terrible is tough to do, but many times it pays off.
This chart of the S&P 500 shows that we are clearly in a new
downtrend, but many of the indicators remain in extremely oversold
conditions. A snap-back rally early this week is very possible, but
with the S&P now trading below both the 200-day moving averages, we
could see a lot of traders selling the rallies.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
crashes are rare but they are more likely to to manifest from a poor
market that has already broken down, such as the current environment.
Counting on a crash is tough since they are so rare, and it's more
likely that the market rallies from these oversold conditions, but there
always that negative outside chance of something sinister happening.
Here are prior times, going back nearly 100 years, when the S&P 500
fell sharply and penetrated below the the 200-day simple moving average
for the first time in 3-months.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
can see that the returns are very volatile, with some up and some down.
Going out one month or longer there is a lot more green than red, but
the losses were pretty steep when it happened.
friends at sentimenTrader.com says, "Since 1950, there have been 12
occurrences like this. Over the next three months, the S&P was
positive 10 of those times. The exceptions were the crash in '87 and a
tiny loss in August 2011 (though it wasn't so tiny at first). A loss of
support always raises the risk of quick panic selling. That could turn
into a once-in-a-decade kind of rout, but historically a better bet
would be that any short-term weakness would quickly be made up."
if you want to take your chances, the odds are pretty good that we get
some kind of rally, but if we're wrong the downside could be very harsh.
Here's where your tolerance for risk should be evaluated.
Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.
The legal stuff:
This information is for educational purposes only! This is not
advice or are commendation. We do not give investment advice. Do not
act on this data. Do not buy, sell or trade the funds mentioned
herein based on this information. We may trade these funds
differently than discussed above. We use additional methods and
strategies to determine fund positions.