01/10/12
Stocks have moved virtually sideways since the January 3rd pop. Yesterday we saw modest gains but again neither the bulls nor the bears are showing much conviction as we enter earnings season.
For the TSP, the C-fund gained 0.23% yesterday, the S-fund was up 0.47%, the I-fund lost 0.12%, and the F-fund (bonds) was up 0.07%.
Small caps did well again so maybe the old January Effect is back. It used to be that small caps outperformed each January, but as the word spread of this phenomenon, the gains started to creep into December as investors and traders tried to front run the January Effect.
You can see just how flat the S&P has been since the January 3rd rally. This is good for digesting gains and taking the indices off of their overbought levels. It won't last however, and the question will be, which way will it break?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I'd actually like to see a breakdown to the old descending resistance line (red) which is the top of the triangle formation. That might complete the inverted head and shoulders test of the neckline before resuming the rally.
I showed some indicators yesterday that told us that the smart money is very bearish while dumb money is getting quite bullish. Not a great setup. The inicator below shows that the Rydex traders are getting more bullish as well, and their Cash Flow Ratio (bear funds + money market / bullish funds) is at a level that has proven to be a tough nut to crack for the market over the last 6-months.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Earnings season officially started yesterday and January's season tends to underperform the April and October seasons, but it's not quite as bad as the July earnings season.
Chart provided courtesy of www.sentimentrader.com
Since 1998 it has only produced gains for the S&P 500 43% of the time, so it may not be an easy ride for the stock market over the next couple of weeks.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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