Like a broken record, stocks saw weakness early, but caught a bid and finished the day with modest gains. The Dow gained 22-points on the day and small caps outperformed again.
For the TSP, the C-fund was up 0.24% yesterday, the S-fund gained 0.44%, the I-fund added 0.25%, and the F-fund (bonds) lost 0.04%.
The S&P 500 has now been up 7 of the last 8 days, and 13 of the last 16. The breakout has held and the recent trading channel is quite narrow. This could go on for days or weeks, or it could all end today. The further we move above support levels, the sharper the selloff could be when it comes.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Remember, the inverse head and shoulders pattern likes to eventually pull back to test the support from the neckline before starting the next leg up.
This chart of the Dow Utilities Index is a good example. The breakout was powerful so the nearest support was a long way down.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Here's a good news / bad news situation. It is a very nice sign for the stock market to see the housing index...
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
... and the banks doing so well. But like the chart of the Utilities above, these skyrocketing breakouts are very vulnerable to a sharp pullback to support, and support is a long way down right now.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The TSP Talk Sentiment Survey came in at 56% bulls, 35% bears, for a bulls to bears ratio of 1.60 to 1. That is a neutral reading in a bull market so the system will remain 100% S-fund for next week.
As I mentioned yesterday, these grinds higher can last longer than you might think, and it could be very frustrating for those waiting for a dip to buy. I have seen it many times where the bears finally give up waiting for a pullback and jump in, and that's about the time we get one of those sharp drops.
Once earnings season kicks in with the bigger names reporting we could see some "sell the news" reaction, but I expect the market to do what we least expect.
Thanks for reading! Have a great holiday weekend.
Tom Crowley
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