01/04/12
2012 got off to a good start with the major indices picking up between 1% and 2% on the day. By the close the Dow gained 180-points, but that was 80+ points off of the highs so sellers did step in late.
For the TSP, the C-fund gained 1.55% yesterday, the S-fund was up 1.30%, the I-fund jumped 2.43%, and the F-fund (bonds) lost 0.20%.
Being that yesterday and today can still be considered holiday trading, I wouldn't be surprised if we see some profit taking sometime this week. The charts look good as resistance was taken out on decent volume, but we've had a 6% gain during the holiday weeks. I'm not getting bearish yet, but I'm aware that there are some signs of the market being extended.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
One of my favorite indicators is the put / call ratios. I'm not sure if it's an end of year thing, but you can see that the smart money (OEX ratio at the bottom in green below) seems to have a tendency to raise their put options as we approach the end of the year, making it appear that they are bearish. (Buying puts sends this indicator down).
It happened at the end of 2009, 2010, and now 2011, yet the market actually went up as we went into the new year each time. I suspect these could be money managers trying to make sure their portfolios are protected during the last few days of the year, or at the start of the new year. Buying puts is a hedge against the market and they make money when stocks go down.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
In contrast, the dumb money of the CBOE and Equity put/ call ratios are moving up during this rally and you can see the CBOE ratio is actually at a 5-month high. It's not an an extreme, but if the upper end of that rising red channel gets hit it may be a good time to step aside, and it is getting close.
I wanted to follow up on what I mentioned about the dollar yesterday. We did see a breakdown from that recent rising trading channel. The 50-day EMA on the UUP ETF is just below the current level, right about where the bottom of an open gap would be filled.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
That could be a convenient downside target, but if the dollar really wanted to get sloppy, it may try to fill that large open gap below 21.25. That would certainly help stocks continue its good start in 2012.
Administrative Note: Intrepid Timer has posted a freeYear End Report for anyone interested. It basically sums up his first year as a premium service and talks about what subscribers might expect in 2012.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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