10/12/11
After Monday's huge holiday rally on low volume, we saw a rather flat day yesterday as the Dow lost 17-points, and again volume was very light. The S&P was basically flat and the Nasdaq closed higher.
For the TSP, the C-fund gained 3.47% on Monday and Tuesday combined, while the S-fund was up 4.13%, the I-fund added 3.41%, and the F-fund (bonds) lost 0.13%.
The S&P 500 is certainly due for a rest after the huge turnaround and rally over the last several days. It is hitting resistance but it did manage to close above the 50-day EMA for a second straight day. I still like to see at least 3, and maybe 5, closes above the 50-day before I will feel better.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We can see a lot of false alarms in a bear market. Back in 2008 - 2009 there were about 3 short moves above the 50-day EMA that turned out to be good selling opportunities rather than buying opportunities. When in a bear market, we should be prepared for bearish results.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq has been leading the way on the upside as it is now ready to test the 200-day EMA for the second time during this bear market. Again, breaking above it would be a positive but until it can prove itself, we should prepare for a bearish outcome - i.e. the 200-day EMA acting as resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We are seeing some positives from the put / call ratios. The smart and dumb money are at, or heading to, very bullish readings. The dumb money is hitting extreme bearish readings, which is generally a bullish sign for the intermediate to longer-term.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The smart money will get more and more bullish until the market finally bottoms. They are not a the levels that we'd normally want to see at a bottom, but it is headed in that direction. You can see a little dip in the recent reading and that tells me they are expecting a short-term pullback.
Bond yields have risen with stock prices over the last week but like the S&P 500, the 10-year yield is now flirting with its 50-day EMA and after the recent run, it could be time for it to take a breather. That would be bullish for the F-fund in the short-term.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Thanks for reading! We'll see you tomorrow.
Tom Crowley
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