9/11/12
Stocks rolled over late Monday and the Dow, which was flat for most of the day, closed down 52-points. We were due for a pullback so this is not a surprise, but I'm seeing some signs of short to intermediate-term trouble.
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[TD="align: center"] Daily TSP Funds Return[TABLE="width: 147"]
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[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] 0.0107%[/TD]
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[TD="align: right"] F-fund:[/TD]
[TD="align: right"] -0.06%[/TD]
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[TD="align: right"] C-fund:[/TD]
[TD="align: right"] -0.61%[/TD]
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[TD="align: right"] S-fund:[/TD]
[TD="align: right"] -0.42%[/TD]
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[TD="align: right"] I-fund:[/TD]
[TD="align: right"] -0.74%[/TD]
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The S&P 500 is still above the old 2012 highs, but is also at the top of the rising trading channel.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
If we get another day or two of downside action, we'll have to be on the lookout for a pullback similar to what we saw throughout the summer.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transportation Index bucked the negative trend yesterday, gaining about a half of a percent and moved back above the 20, 50, and 200-day EMA's.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Here's what's worrying me. The smart money indicator, the OEX put/call ratio, hit another extremely bearish daily reading yesterday, moving above 4.5 for a second time in a couple of weeks. That sent the important 10-day moving average down to a 2.26 to 1 put to call ratio.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
That is the most bearish reading I can see on the long-term OEX put/call ratio chart, which (not shown) goes back to 1989.
Not to get all political here, but I am wondering if this has anything to do with President Obama gaining the the presidential election polls. Come January the next president is going to have to determine what to do with the expiring tax rates. If Obama is reelected, there is a much greater chance that the the rates will be increased and the market won't like that. Traders and money managers may want to have some protection in place in case that happens.
The other thing it could be is some kind of hedge against what could happen to stocks if the Fed does not give us some clarity on QE3 later this week. A hedge is what OEX options are generally used for. The traders and money managers own stocks, but buying put options (bets against the stock market) is a cheap way to add protection to their accounts without having to sell the stocks (and pay capital gains).
Perhaps it is a hedge against the September 11th anniversary - just in case? I don't know what it is, but when an indicator gives a reading that hasn't happened in over (at least) 23 years, we may want to take it as a warning.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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