6/12/12
Stocks opened sharply higher on Monday, as we suspected since the overnight futures were so strong, but the buyers showed up at the opening bell and sold that rally until the closing bell. The Dow lost 146-points.
[TABLE="align: center"]
[TR]
[TD]
[TD="align: center"] Daily TSP Funds Return
[TABLE="align: center"]
[TR]
[TD="align: right"] G-Fund:
[/TD]
[TD] +0.012%
[/TD]
[/TR]
[TR]
[TD="align: right"] F-fund:
[/TD]
[TD] +0.21%
[/TD]
[/TR]
[TR]
[TD="align: right"] C-fund:
[/TD]
[TD] -1.26%
[/TD]
[/TR]
[TR]
[TD="align: right"] S-fund:
[/TD]
[TD] -2.16%
[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:
[/TD]
[TD] - 0.96%
[/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The S&P 500 found resistance near 1335 - a few ticks high than the prior peak in May and just below the 50-day EMA. It also came to rest at what would have been the rising support line had the S&P made a higher high over that prior May peak. Officially it did [make a higher high], but it may not be significant enough to call it a higher high - particularly since it did not hold.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The 50-day EMA did become resistance on the way up and investors were ready to sell it, and the S&P closed below the 200-day EMA again. The PMO and MACD do show positive readings.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The possible inverted head & shoulders pattern (we have a left shoulder and the head), which was discussed on the forum yesterday by one of our members, gives us an interesting situation. Inverted H&S patterns are considered bullish, but H&S patterns in general are continuation patterns. That means in a rising market, it would break to the upside like it did in late 2011, early 2012. In a down trending market they can act as a reversal bottoming pattern, or they can also complete the right shoulder and break down, so this isn't a clear bullish formation yet since we are tending downward at the moment.
The chart below shows that newsletter writers got a little less bearish last week, but they are still deeply in a bearish sentiment. While this can be an indication that a low is near, like we saw in in both 2010 and 2011, it also shows that these bottoms can take a few months to play out, and the current overly bearish signal from these newsletter writers has only lasted about a month or so.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The good news is, 11 of the last 12 times we saw readings this bearish the market was higher two months later and the median drawdown was less than 1%. The bad news is, the only time it wasn't higher, it was down over 34% two months later.
Chart provided courtesy of www.sentimentrader.com
There's always a catch.
Thanks for reading! We'll see you tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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