Bad news / good news

11/16/11

Stocks opened lower yesterday but buyers stepped up taking the indices well into positive territory by late afternoon. Some late selling took stocks of their highs and the Dow closed up 17-points, but the broader U.S. market indices fared much better with gains of 0.5% to 1.5%.

For the TSP, the C-fund gained 0.50% yesterday, the S-fund was up 0.98%, the I-fund lost 1.17%, and the F-fund (bonds) fell 0.17%.

The bad news yesterday was the the yield of the Italian 10-year bond moved back over 7%, a level that led other European countries hit just before needing a bailout.

The good news was, the U.S. stock market rallied despite the 7% yield, as the U.S. economic data, in particular retail sales and producer prices, was not bad.

S&P 500 remained in the triangle and remained above the key 20, 50 and 200-day EMA's.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I'm still expecting something like this to occur...

I noticed that the market leader, the Dow Transportation Index, may have already had its triangle formation fake-out / breakout scenario that we have been watching. Our confirmation would be if the top of the triangle, the old resistance, become support.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

I want to revisit the weekly chart that I posted on October 31. If you recall, we were seeing a possible repeating pattern from 2007-2008 on the weekly chart. Back then I said, "...if we get a 2007 - 2008 scenario, the market took 8 weeks to go from bottom to peak before rolling over, so I would not be surprised if we see the current market rally into the end of the year.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Well, it's only been two plus weeks but we have moved higher and the pattern seems to be continuing.

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Unfortunately, if the pattern continues for more than a few more weeks, we may have a lot of trouble coming our way, but the rally into the end of the year would still be a possibility.

One other thing, the PMO indicator (Price Momentum Oscillator) is looking a little toppy on the daily charts, but this recent sideways action is helping take it off of overbought levels. Now take a look at the PMO indicator on the weekly chart above. It just gave a buy signal as the weekly reading moved above the 10-week EMA - which is what we saw in September of 2010.

While I remain bullish for the short-term given the chart patterns and seasonality, I am always aware that a breakdown in the chart means a new outlook. Hopefully we can make some money going into the end of the year, which has been mediocre at best. Because, if the 2007-2008 chart pattern does repeat, we may have to a wait a couple of more years before we see a strong year for stocks. Let's hope that is not the case, but if it is, I really want to take any gains the market is willing to give.

Based on the futures, it looks like we could be getting the breakdown of the triangle on Wednesday. The question is, will it be the "fake-out" that eventually turns into a breakout (on the upside).

Thanks for reading! We'll see you back here tomorrow.

Tom Crowley


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.

 

[xarmy87]

Tom, i wish to apologize to you and coolhand for the first ever post comments i made a couple of week's ago, remember, "the PLAIN OL' Balls" comment? Because when i went back and reviewed your october 4th commentary ( at the bottom ).... i saw at the bottom your statistic's for positivity of the s&p for the next several week's following a consecutive 2nd day closing low. Quote "Since 1928, if the 2nd down day was a Monday (as it was this time), then the next week was positive all 5 times, averaging +11.1%." I do appreciate alll of your guidance and information, but i must have had a mental epiphany about the market's direction (that was only good for one time use and expired in 27 day's or less..hahaha). Because my "ball's/gut" told me to go 100% "S" from Oct.3rd thru the 30th, but i followed the Sent.survey (which has helped me in the past, i must say) and i guess i was pissed at myself and lashed out by making uncalled for dispariging comment's about you and cool hand and your respective system's. so again, i apologize to you both. If i had followed my gut and the last paragraph of your Oct.4th commentary (which i admit i did not read thoroughly )...i would have made enough to cover the next 2 year's of my TSP withdrawal's. Anyway it was no fault of you guy's. Thank's again for such indepth advice and info. Sincerely. Brian

 

[Sensei]

"... the U.S. stock market rallied despite the 7% yield, as the U.S. economic data, in particular retail sales and producer prices, was not bad."

Asia & Europe were both down, and we were up. Now Asia continues to move lower. Lately the markets seem to be moving in lockstep, with either us or Europe taking the lead, and Asia following the next day. What does it say that Asia is not following us up today? With the late sell off for our market, and negative follow through in Asia, my guess is lower prices to come.

 

[tsptalk]

Thanks Brian. It's all good. If you notice I didn't really get too defensive over the post. It wouldn't be the first time someone reacted to a commentary of mine that didn't work out well. I kind of got used to it over the years. It seems some disatified people leave and never come back, and others stick around like you and see that this is not an easy game for anyone. I'm glad you are in group 2.

Tom

Tom, i wish to apologize to you and coolhand for the first ever post comments i made a couple of week's ago, remember, "the PLAIN OL' Balls" comment? Because when i went back and reviewed your october 4th commentary ( at the bottom ).... i saw at the bottom your statistic's for positivity of the s&p for the next several week's following a consecutive 2nd day closing low. Quote "Since 1928, if the 2nd down day was a Monday (as it was this time), then the next week was positive all 5 times, averaging +11.1%." I do appreciate alll of your guidance and information, but i must have had a mental epiphany about the market's direction (that was only good for one time use and expired in 27 day's or less..hahaha). Because my "ball's/gut" told me to go 100% "S" from Oct.3rd thru the 30th, but i followed the Sent.survey (which has helped me in the past, i must say) and i guess i was pissed at myself and lashed out by making uncalled for dispariging comment's about you and cool hand and your respective system's. so again, i apologize to you both. If i had followed my gut and the last paragraph of your Oct.4th commentary (which i admit i did not read thoroughly )...i would have made enough to cover the next 2 year's of my TSP withdrawal's. Anyway it was no fault of you guy's. Thank's again for such indepth advice and info. Sincerely. Brian

 

[xarmy87]

Good day Tom, and looking at today's future's (11/16/2011).I must say...Goodbye gain's of the last 2 day's....hahaha. It's a madhouse!! A madhouse!!!!! I find Charleton Heston strangely comforting in time's such as these. ,). Go figure. P.S. Which shell is the peanut actually under? I guess you must truly be a student of the "game" long enough to perhap's figure it out, at least 20% of the time anyway. Good luck to all of you player's. But the U.S. debt really has me worried, especially for our younger american's.

 

[kassypoo]

I am definitely in Group #2 (lol) and appreciate all the hard work that goes into your daily analysis. I don't know how you find the time to put it all together, but all of us who follow your column ( which is the best that's available) value it highly. Don't ever doubt you're doing a valuable service for all of us TSPers and even some of my friends who are not in the government.

 

[tsptalk]

"the best that's available"? Wow, thanks! I appreciate that.

As far as finding time, I quit my cushy GS-13 job back in 2008 to do TSP Talk full time, so it's really all I do. No regrets, as I love what I do now...

Thanks again!