9/05/12
Stocks were mixed yesterday but put in a nice reversal day as steep early losses were pared by the afternoon, and in some indices, were turned into gains. The Dow closed down 55-points, the S&P slipped less than 2, while the Nasdaq and small caps closed up on the day.
[TABLE="align: center"]
[TR]
[TD]
[TD="align: center"] Daily TSP Funds Return
[TABLE="width: 158"]
[TR]
[TD="align: right"] G-Fund:
[/TD]
[TD="align: right"] 0.0136%
[/TD]
[/TR]
[TR]
[TD="align: right"] F-fund:
[/TD]
[TD="align: right"] -0.01%
[/TD]
[/TR]
[TR]
[TD="align: right"] C-fund:
[/TD]
[TD="align: right"] -0.11%
[/TD]
[/TR]
[TR]
[TD="align: right"] S-fund:
[/TD]
[TD="align: right"] 0.89%
[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:
[/TD]
[TD="align: right"] -0.70%
[/TD]
[/TR]
[/TABLE]
[TABLE="align: center"]
[TR]
[TD="align: right"]
[/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The S&P 500 dipped below the 20-day EMA in intra-day trading, but closed back above it. The 0.1% loss kept the mostly sideways action going, and after this kind of consolidation, we are probably due for a sharp break in one direction or the other. perhaps Friday's jobs report will be the catalyst.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow transportation Index has been forming a large triangle formation. Earlier this month we saw a temporary break on the upside of the triangle, and yesterday we saw a temporary breakdown from the triangle. The breakdown did not last long and the index put in a nice reversal day. This is a short-term positive (days), despite what looks like a chart that needs some help, with it trading below the 20, 50, and 200-day EMAs.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Also, the 50-day EMA is getting very close to crossing below the 200-day EMA, and if that happens we would officially be putting the Transports in a bear market category.
The small caps of the Russell 2000 were the big winners yesterday as the early losses turned into a 1.2% gain by the close. That was enough to move the Russell to its highest closing level since late April. The question is, will this be the leader, or will the Transportation index, normally the leader, keep the pressure on the S&P 500?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
There is a positive development from the VIX / S&P 500. According to sentimenTrader.com, the VIX, or "fear gauge" has risen in 9 of the last 11 days. Yet during that time, the S&P 500 has lost less than 1%.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The table below shows every other time in the past 25 years that fear rose at least 9 out of 11 days, but the S&P didn't lose more than 4%.
One and three months later, the S&P saw only 2 negative returns out of the14 occurrences.
sentimenTrader.com said, "By six months later, the index was positive every time, and with a median return that was more than twice as large as a random six-month return during the study period. The previous VIX study we looked at (when it jumps more than 25%) was inconclusive, but this one shows a solid positive bias.
"There are only two instances in the past 15 years, so that diminishes the weight of the study. Also, due to the plethora of traders trading the VIX directly now, we're leery of reading too much into it as a pure sentiment indicator. Given that, we'd rate this as a positive for stocks, but with a low priority."
Chart provided courtesy of www.sentimentrader.com
We are seeing some short-term positives, but the Transports better shape up or the longer-term could be getting a major warning flag.
Administrative Note: This year's NFL "Last Man Standing" pool is getting started. It's easy... and free! Click here for more information.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.html
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. 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.
