12/11/12
Small caps perked up some, but the Dow and S&P 500 did very little during yesterday's trading. The Dow gained 15-points while the S&P picked up less than 1.
[TABLE="width: 88%, align: center"]
[TR]
[TD="width: 241"]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 152"]
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[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] 0.0114%[/TD]
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[TD="align: right"] F-fund:[/TD]
[TD="align: right"] 0.22%[/TD]
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[TD="align: right"] C-fund:[/TD]
[TD="align: right"] 0.04%[/TD]
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[TD="align: right"] S-fund:[/TD]
[TD="align: right"] 0.41%[/TD]
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[TR]
[TD="align: right"] I-fund:[/TD]
[TD="align: right"] 0.08%[/TD]
[/TR]
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[TABLE="width: 80%, align: center"]
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[TD="align: right"] [/TD]
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Consolidation and sideways action is not a bad thing, especially after a 6% rally off of the November low. The inverted head and shoulders pattern looks poised to break to the upside and the bulls just have to hope that the squabbling in Washington doesn't spoil it.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transportation Index has come back to life gaining another 1% yesterday. This market leader has knocked on the top of its trading range door many times over the last several months, but has been unable to break out. The inverted head and shoulders pattern could be the ammunition this index needs to finally breakout to a new multi-month high.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq has been lagging some lately but it had rallied over 200-points from the November low to the post Thanksgiving high, and it has now erased its overbought condition. In a strong bull market, sometimes a neutral reading on the overbought/oversold indicator is all that is needed to get another push higher.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
There is some good news and bad news on the smart money OEX put / call ratio front. The bad news is that the smart money has been getting themselves in a more defensive position since the the peak after Thanksgiving. And yesterday's one-day reading of 3.74 is normally a pretty bearish sign.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The good news is something I have mentioned before... The smart money tends to get defensive toward the end of every year in these options, and the market does not seem to mind. As a matter of fact the indices rallied strongly at the end of December and into January in 2010 and 2011 despite the very weak readings from the smart money.
I have speculated before that it could be the smart money protecting their yearly gains, not willing to take on too much risk as the year comes to a close. Rather than sell stocks and pay capital gains, they could be purchasing put options that will protect their balances if the market should fall. Just a hunch.
The action has been dull but the charts seem to be looking for some kind of push higher. A resolution to the fiscal cliff negotiations could be the catalyst, but I really hate to count on that. We know that sometimes the market reacts first and then the news follows. Perhaps something else will come along if not the fiscal cliff.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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