12/02/11
It was a quiet day on Wall Street on Thursday with only about an 80-point trading range for the Dow after the 490-point gain on Wednesday. After a 3-day, 7% rally, a 26-point loss is actually not bad at all.
For the TSP, the C-fund slipped 0.19% yesterday, the S-fund lost 0.52%, the I-fund fell 0.76%, and the F-fund (bonds) lost 0.25%.
We'll have to watch out, however. Sometimes big rallies stall for a few days then reverse down, but other times the pause is a time to regain strength for a new push higher.
Today's jobs report will be a short-term catalyst but all eyes will be on Europe again as there is a big meeting over the weekend between the leaders of France and Germany. This is going to haunt us for a long time. The question is, can we take advantage of rallies while it plays out?
The small loss in the S&P 500 keeps it under the bull flag resistance line. The 20-day EMA has now crossed back above the 50-day, and the index has now closed above the 200-day EMA for 2 consecutive days. I like to see 3 to 5 before getting too excited.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq actually closed higher yesterday, and while it also closed back above the 200-day EMA for a second consecutive day, there are those two glaring open gaps down below that are begging to get filled. Gaps tend to get filled sooner rather than later, but not always. It would not be totally out of the question for the Nasdaq to rally into the end of the year and fill the gaps after the new year, but that would be less common.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The NYSE is back in neutral territory after hitting those extreme oversold conditions. I pointed out below, other times an extreme reading moved back to neutral and the future action seemed random - Some rallies, some declines.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We have been looking for the 10-year T-note to move and stay above the 2.0% area as an indication that the bond market is simpatico with a rally in the stock market. When yields move below 2% it is a sign that the bond market is expecting trouble in the stock market, so it is somewhat of a bullish sign for stocks to see the 10-year yield move over 2.1%.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
You can see that the yield broke to the upside of a bullish descending wedge pattern, and there are two large gaps overhead that could be targets if stocks continue to rally and the news out of Europe can stay relatively quiet. Remember, bond prices and the F-fund go down in value, when the yields go up.
The TSP Talk Sentiment Survey came in at 55% bulls, 33% bears, for a bulls to bears ratio of 1.67 to 1. That is a sell signal in a bear market which means the system will remain 100% G Fund for next week.
A reminder that the estimates for Friday's jobs report are for about 123,000 jobs being added, and an unemployment rate of 9.0%. The fireworks will begin before the market opens.
Thanks for reading! Have a great weekend!
Tom Crowley
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