10/13/11
Stocks rallied strongly for most of the day yesterday but some late selling took about half the early gains away by the close. Despite the reversal, it was yet another triple digit gain for the Dow as it close up 103-points.
For the TSP, the C-fund gained 0.99% yesterday, the S-fund was up 1.41%, the I-fund jumped 1.80%, and the F-fund (bonds) lost 0.17%.
The S&P 500 is making its way through resistance areas like a hot knife through butter, but it has become quite overbought and making new multi-month highs this week would be quite a feat.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq managed to trade above the 200-day EMA again, but slipped below it before the close. This is where it should find some problems and not being a seller here would look silly in hindsight, should the market pull back from here. Just like it would have seemed silly not to buy at support earlier this month, but hindsight trading is easy. The question is, can the market and the Nasdaq make new highs or will it pullback from the top of the range again?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I am posting this chart of the Dow just to show that it too is battling a major resistance level.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
All of this overbought / over extended talk sounds good and could cause the market to pause, but the fact is that we have had a long 3+ month consolidation, and that could be all the bear market is going to get out of investors.
In the short-term, the market is extended and historically yesterday's action says we should see a pullback. According to sentimenTrader.com:
"There have been 8 times the S&P gapped up like it did today, rallied at least +1% more, then fell back at least -1% into the close. 6 of the 8 sported negative returns over the next 3 days."
But looking out further, although rare, the recent action has been an historical bullish juggernaut.
"Longer-term, the rally we've seen has obviously been impressive. It's also very rare. There have only been five other times we've seen a similar performance since 1928.
"What we're looking at is any other time the S&P rallied 9% or more off of a 52-week low, managing to stage at least a 7-day rally with no -1% days mixed in.
"Going forward, each of them tacked on more gains during the next month, averaging +4.1%. The only failure to mark a major low was in April '01. All of the others were very important market bottoms."
Chart provided courtesy of www.sentimentrader.com
This is not a great sample size but that tells us how rare this recent rally is. It's tough to argue with the numbers, although there are no guarantees and I'm guessing that Europe wasn't seeing a series of countries on the verge of bankruptcy as we are seeing today. We'll see.
Thanks for reading! We'll see you tomorrow.
Tom Crowley
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
Stocks rallied strongly for most of the day yesterday but some late selling took about half the early gains away by the close. Despite the reversal, it was yet another triple digit gain for the Dow as it close up 103-points.
For the TSP, the C-fund gained 0.99% yesterday, the S-fund was up 1.41%, the I-fund jumped 1.80%, and the F-fund (bonds) lost 0.17%.
The S&P 500 is making its way through resistance areas like a hot knife through butter, but it has become quite overbought and making new multi-month highs this week would be quite a feat.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq managed to trade above the 200-day EMA again, but slipped below it before the close. This is where it should find some problems and not being a seller here would look silly in hindsight, should the market pull back from here. Just like it would have seemed silly not to buy at support earlier this month, but hindsight trading is easy. The question is, can the market and the Nasdaq make new highs or will it pullback from the top of the range again?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I am posting this chart of the Dow just to show that it too is battling a major resistance level.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
All of this overbought / over extended talk sounds good and could cause the market to pause, but the fact is that we have had a long 3+ month consolidation, and that could be all the bear market is going to get out of investors.
In the short-term, the market is extended and historically yesterday's action says we should see a pullback. According to sentimenTrader.com:
"There have been 8 times the S&P gapped up like it did today, rallied at least +1% more, then fell back at least -1% into the close. 6 of the 8 sported negative returns over the next 3 days."
But looking out further, although rare, the recent action has been an historical bullish juggernaut.
"Longer-term, the rally we've seen has obviously been impressive. It's also very rare. There have only been five other times we've seen a similar performance since 1928.
"What we're looking at is any other time the S&P rallied 9% or more off of a 52-week low, managing to stage at least a 7-day rally with no -1% days mixed in.
"Going forward, each of them tacked on more gains during the next month, averaging +4.1%. The only failure to mark a major low was in April '01. All of the others were very important market bottoms."
Chart provided courtesy of www.sentimentrader.com
This is not a great sample size but that tells us how rare this recent rally is. It's tough to argue with the numbers, although there are no guarantees and I'm guessing that Europe wasn't seeing a series of countries on the verge of bankruptcy as we are seeing today. We'll see.
Thanks for reading! We'll see you tomorrow.
Tom Crowley
The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
