09/28/11
Stocks followed through on Monday's big rally, with another big rally on Tuesday. The good news was, the Dow gained another 147-points. The bad news was that it closed nearly 180-points off of the high, as it had been up 326-points before the late fall off
.
For the TSP, the C-fund gained 1.07% yesterday, the S-fund was up 1.86%, the I-fund jumped 2.72%, and the F-fund (bonds) lost another 0.37%.
The S&P 500 moved up above the bear flag resistance line and 20-day EMA yesterday like a hot knife through butter, but just as easily it fell right back down to close just below those levels. This negative reversal left a long kangaroo tail that has a strong tendency to mark at least a short-term end to the rally.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I am not a big follower of volume, but it is worth noting how volume was nothing to get excited about during such a big rally.
The Nasdaq filled the gap that was left open last Thursday, but yesterday's strong open left yet another gap open on the chart - this one on the downside. It's just that small box within the larger one.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq made an intraday move above the 50-day EMA again, but closed below it.
The NYSE overbought / oversold indicator has bounced off of its extreme oversold reading from last week, and is actually in overbought territory after a 3-day rally. It's not an extreme overbought reading, but in a bear market, selling overbought readings can save you money.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
After moving into oversold territory, during a bear market, and seeing a late sell off yesterday that produced a negative kangaroo tail reversal, the bulls should probably be concerned. At least in the short-term.
Whether we come back down to test the lows again remains to be seen, but it seems these recent rallies and sell-offs have been lasting 3 to 4 days before reversing, and that could mean the next 3 days will be down. If not, perhaps the bottom is in. We'll have to wait and see.
I had talked about the possibility of seeing a rally this week, perhaps even a bottom, but it was based on seeing a washout sell-off first so I did not see the recent rally coming. Perhaps we can get that washout bottom on this push lower? I'm getting tired of being bearish.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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