Stocks rallied again on Friday closing out one of the best weeks of the year, during historically the worst month of the year. The Dow gained 75-points while the S&P and small caps saw slightly lower gains percentage-wise, and the I-fund lost a bit of ground.
[TABLE="width: 80%, align: center"]
[TR]
[TD="width: 310"]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 159"]
[TR]
[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] +0.0063%[/TD]
[/TR]
[TR]
[TD="align: right"] F-fund:[/TD]
[TD="align: right"] +0.04%[/TD]
[/TR]
[TR]
[TD="align: right"] C-fund:[/TD]
[TD="align: right"] +0.27%[/TD]
[/TR]
[TR]
[TD="align: right"] S-fund:[/TD]
[TD="align: right"] +0.32%[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:[/TD]
[TD="align: right"] -0.20%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 69%, align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The market is throwing curve balls at every opportunity and continues to keep investors nervous while moving along without too many hitches. We're seeing pullbacks, but nothing major, and every one this year has turned out to be a buying opportunity. We're a stone's throw away from new highs on many indices and by the looks of the overnight futures, we could be testing those highs early this week. But the FOMC meeting is Tuesday and Wednesday of this week, and the market will certainly be watching closely and reacting, and probably overreacting, whatever is said and done.
The S&P 500 (SPY) now has one open gap after consolidating during the last 4 days of the week lest week. This consolidation on some other charts looks more like a bull flag and of course bull flags break to the upside, in general. Another reason to suspect a test of the August highs. Volume has been light as the uncertainties pile up.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Here's the Russell 2000 and you can see a more defined bull flag. The indices are on the overbought side but it looks like a test of the recent highs is in the cards.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Even if we see new highs, which is usually a very good technical sign, Syria, the Fed, the debt ceiling, and negotiations for a continued resolution to fund the government loom large and could easily swat stocks down if there are any surprises.
Bond traders are getting bearish and so much so that it could now be a positive for the bond market. The large speculators who are mostly trend following traders, have gone to the bearish side. Readings this low have produced some playable bounces over the short to intermediate-term, and in some cases out right bottoms into bull market rallies.
Chart provided courtesy of www.sentimentrader.com , analysis by TSP Talk
The IEF, which is a bond ETF, is again testing the top of the descending trading channel and should the bond sentiment be bearish enough, perhaps we are close to seeing this descending trend break to the upside.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The 10-year Treasury has so far been unable to crack the 3% level after several attempts recently. That may be the golden sign. As long as the yield stays under 3% we may be able to be aggressive in bonds and the F-fund. If we see the yields move above 3%, it could mean the downtrend in bonds is here to stay for some time. It is currently sitting around 2.90%.
All eyes will be on the Fed and on Wednesday afternoon we may get our answers, if not sooner. Will the Fed slow down their bond buying plan? Is there any thoughts of raising interest rates? All answers that will certainly move the market one way or the other.
The market looks like it will have yet another gap open this morning, but remember that Monday morning gaps tend to be emotionally driven and don't always hold. This one looks serious, however.
In today's TSP Talk Plus report we'll go over some short-term and intermediate-term indicators, the put/call ratios, and investor sentiment. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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