08/01/12
Stocks struggled to find direction yesterday, but by the close it was the sellers who took control. The Dow lost 64-points and most major indices lost about a half of a percent.
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[TR]
[TD]
[TD="align: center"] Daily TSP Funds Return
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[TD="align: right"] G-Fund:
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[TD] +0.004%
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[TD="align: right"] F-fund:
[/TD]
[TD] +0.07%
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[/TR]
[TR]
[TD="align: right"] C-fund:
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[TD] - 0.43%
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[/TR]
[TR]
[TD="align: right"] S-fund:
[/TD]
[TD] - 0.58%
[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:
[/TD]
[TD] - 0.53%
[/TD]
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[TR]
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[/TD]
[/TR]
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[/TD]
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Here are the final returns for July:
The S&P 500 failed for a third day to move above the rising resistance line, but we may be seeing a bull flag forming. The key will be to avoid a sharp move down like we saw at the prior June and July peaks, which would break the flag. But a gentle slope down is more of a consolidation and if it holds could break to the upside.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transportation Index is also sporting a bull flag and it is currently trying to find support at the 20, 50, and 200-day EMA's. That should provide support, but this index has been bobbing and weaving above and below the EMAs with ease for several weeks now. Like the S&P 500, it's a bull flag vs. overhead resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The CBOE put / call ratio, considered one of the dumb money indicators, is showing that the dumb money is nearly as bullish as it has been at any time since early 2011.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The tendency is for the market to be close to a peak when we see a read this high (on the chart, not in number) but you can see that some of the other readings this high (green arrows) did little to deter a rally. I have always thought, however, that the end of the year / beginning of the year skews these put / call ratios and the two rallies marked above in the chart above were within the first 6 weeks of the year. Same thing happened at the end of 2010 / beginning of 2011.
This chart from sentimenTrader.com surprised me quite a bit. The "Odd Lot" traders, traders who buy fewer than 100 shares of a stock when traded, used to be a very consistent contrarian indicator, meaning when these small traders were very bullish, the market would tend to peak, and vice versa.
Chart provided courtesy of www.sentimentrader.com
But over the last couple of years the opposite has been true. That doesn't make sense to me but the trend is pretty apparent.
The six other times we've seen the Odd Lot Purchase % get this low since the beginning of 2011, the S&P 500 has sold off over the next 5-10 days by 2% - 4%.
Today the Fed wraps up their FOMC meeting and we should get a policy statement this afternoon. These used to be big market movers back when they actually made adjustments to interest rates, but the Fed Funds rate has been pinned near zero for years now and there's no expectations of any changes today. What everyone wants to hear is how serious are they about a QE3. That is what will be the market mover.
Thanks for reading! We'll see you here tomorrow.
Tom Crowley
Posted daily at www.tsptalk.com/comments.html
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