9/18/12
Stocks took a day off from their recent breakout as some of the indices were quite overbought and probably need a couple of days to regain some strength. The Dow lost 40-points.
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[TD="align: right"] 0.14%[/TD]
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[TD="align: right"] -0.89%[/TD]
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[TD="align: right"] -0.40%[/TD]
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The S&P 500 pulled back on lighter volume - typical bullish action after a big rally. I would be surprised if this turns into anything too negative, and if the top of the rising trading channel (red) doesn't hold as support I'd assume the 20-day or 50-day EMAs would. Although, as I talked about in the Weekly Wrap Up, after the 1st 2 QE's we saw some sharp selling before the upside trend continued.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transportation Index fell sharply yesterday, wiping out the prior three days' gains. The index has been trading between about 4950 and 5250 for a few months and perhaps this is the top of the range turning back the rally again?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Not surprisingly, the NYSE overbought / oversold indicator had moved up near extreme overbought levels prior to yesterday's dip. Generally, if the bull market remains in good shape, a move down near -0- or just below is a good place to be buying a pullback - assuming nothing out of the ordinary sends the market tumbling.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Smart / Dumb Money Confidence Indicator at sentimenTrader.com shows that the smart money score is now down to 29, while the dumb money score is 63. When one of these indicators is below 40, while the other is above 60, it becomes a time to look for a top or a bottom. In this case with the smart money the one below 40 and the dumb money above 60, it is a bearish warning.
Chart provided courtesy of www.sentimentrader.com
Although the charts look bullish, but due for a pullback, we do see that the last half of September is the weaker half of the month historically.
Chart provided courtesy of www.sentimentrader.com
Except during some holiday periods, I try not to let seasonality be a primary indicator, but September is by far, the weakest month of the year historically, and being that we are heading into the weaker half of the month, it starts to figure a little more into the equation.
Chart provided courtesy of www.sentimentrader.com
I'm not saying the rally will necessarily end, but there may be a little headwind making things a little less easy than they have been.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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