10/28/11
Stocks across the globe surged after a deal was reached to solve the European debt crisis. Whether it works or not, we don't know. This is likely just kicking the can down the road but for now it gave the market a little bit of something solid, at least for a little while. The Dow jumped 340-points.
For the TSP, the C-fund was up 3.44% yesterday, the S-fund gained 4.37%, the I-fund gained 5.33%, and the F-fund (bonds) lost 0.47%.
The news was just too much for the charts and indicators to care. We saw the technical picture improve having taken out the 200-day EMA and making a higher high, but of course after a move like we've saw this week (over 500 Dow points in 2 days), the indicators are quite overbought.
Volume was high so this tells me that a lot of the cash that was on the sidelines from the bigger money, was willing to jump in with this European obstacle at least somewhat behind us.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
If there are a lot of folks still on the sidelines, and I'm one of them because of using my IFT's earlier in the month, the dips could be shallow as each pullback will bring in some new cash. So, while we are seeing overbought readings, I don't expect any pullbacks to be too harsh. Of course now that I've said that, we will probably get some terrible news to prove me wrong.
The bullish news out of Europe did a number on the U.S. dollar as Germany has basically taken a lot of heat off of the euro. Dollar down - stocks up.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I wasn't going to post this AAII sentiment survey because it was taken before the rally on Thursday, but you can see that investors were getting more bullish prior to the bailout news. Even without the survey taking the 340-point rally into consideration, the bull (43%) to bear (25%) ratio moved up to 1.72 to 1.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The TSP Talk Sentiment Survey was taken during and after the 340-point rally and you can see how bullish we've become. The bulls (64%) to bears (26%) ratio was 2.46 to 1, which is a sell signal in either a bull or bear market. That means the system will remain 100% G Fund for the week of 10/31/11 - 11/04/11. The system has struggled this year, partially I believe because our readers are becoming a little more savvy than the typical contrarian dumb money, but also because of some timing of the rallies and the day of the survey. I never have used it exclusively, but more like I would use seasonality: That is, it helps shape my decisions.
Here is some data from our friends at sentimenTrader.com regarding the big move in October:
Courtesy of www.sentimentrader.com, analysis by TSP Talk
So the technical picture is extended but bullish. Barring any negative surprises out of Europe, we could see some follow through action on the upside for another day or so, but I would expect some sideways to slightly downward action after that to take the indicators off of their extremes. Once that happens, I'd say that the road to strong finish to 2011 may have been paved.
Thanks for reading! Have a great weekend!
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.
Stocks across the globe surged after a deal was reached to solve the European debt crisis. Whether it works or not, we don't know. This is likely just kicking the can down the road but for now it gave the market a little bit of something solid, at least for a little while. The Dow jumped 340-points.
For the TSP, the C-fund was up 3.44% yesterday, the S-fund gained 4.37%, the I-fund gained 5.33%, and the F-fund (bonds) lost 0.47%.
The news was just too much for the charts and indicators to care. We saw the technical picture improve having taken out the 200-day EMA and making a higher high, but of course after a move like we've saw this week (over 500 Dow points in 2 days), the indicators are quite overbought.
Volume was high so this tells me that a lot of the cash that was on the sidelines from the bigger money, was willing to jump in with this European obstacle at least somewhat behind us.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
If there are a lot of folks still on the sidelines, and I'm one of them because of using my IFT's earlier in the month, the dips could be shallow as each pullback will bring in some new cash. So, while we are seeing overbought readings, I don't expect any pullbacks to be too harsh. Of course now that I've said that, we will probably get some terrible news to prove me wrong.
The bullish news out of Europe did a number on the U.S. dollar as Germany has basically taken a lot of heat off of the euro. Dollar down - stocks up.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I wasn't going to post this AAII sentiment survey because it was taken before the rally on Thursday, but you can see that investors were getting more bullish prior to the bailout news. Even without the survey taking the 340-point rally into consideration, the bull (43%) to bear (25%) ratio moved up to 1.72 to 1.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The TSP Talk Sentiment Survey was taken during and after the 340-point rally and you can see how bullish we've become. The bulls (64%) to bears (26%) ratio was 2.46 to 1, which is a sell signal in either a bull or bear market. That means the system will remain 100% G Fund for the week of 10/31/11 - 11/04/11. The system has struggled this year, partially I believe because our readers are becoming a little more savvy than the typical contrarian dumb money, but also because of some timing of the rallies and the day of the survey. I never have used it exclusively, but more like I would use seasonality: That is, it helps shape my decisions.
Here is some data from our friends at sentimenTrader.com regarding the big move in October:
Courtesy of www.sentimentrader.com, analysis by TSP Talk
So the technical picture is extended but bullish. Barring any negative surprises out of Europe, we could see some follow through action on the upside for another day or so, but I would expect some sideways to slightly downward action after that to take the indicators off of their extremes. Once that happens, I'd say that the road to strong finish to 2011 may have been paved.
Thanks for reading! Have a great weekend!
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.
