10/11/11
Despite the bond market, some overseas markets, and many banks being closed yesterday, Columbus Day turned out to be a huge day for the stock market. The Dow closed the day up 330-points yesterday, the 10th triple digit day for the Dow in the last 11.
The TSP was closed on Monday so we don't get to see how the share prices were affected until after today's close.
Friday's jobs report came in better than expected but the market did not react very well. After an initial strong opening on the news, the indices gave up those gains and closed in negative territory on Friday. More, in my opinion, overly optimistic news out of Europe over the weekend gave investors something to chew on, and they did not hesitate at all yesterday. With resistance still around, we will have to see how those investors react during the rest of the week. They have sure been prone to taking profits over the last couple of months.
With yesterday's 3.4% rally, we saw some big technical developments on the S&P 500 as it closed above the bear flag bottom and the 50-day EMA, plus the descending trendline off of the late July highs. I always prefer to see the breakouts last for at least 3 before being convinced, and with yesterday trading being on extremely low volume because of the holiday, I am not ready to trust this breakout.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The market leader, Dow Transportation Index, gained nearly 4% on the day and is now testing its upper resistance of the trading channel and 50-day EMA. Also, the decreasing volume on the recent rally is just too obvious to ignore.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
If we are truly producing a market bottom, we could see something similar to the 2010 market bottom where the descending trend was broken convincingly, and the 50 and 200-day EMA's were taken out, and held.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The NYSE overbought / oversold indicator is back near +500. In a bear market this is a time when stocks would start to falter, so again, we should have a pretty good test of the strength of this rally in the next couple of days.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The TSP Talk Sentiment Survey came in at 44% bulls, 44% bears last week, for a bulls to bears ratio of 1.0 to 1. That is a sell signal a bear market which means the system moved to 100% G-fund for this week.
I took that signal and pocketed some profits (almost 3%) after last week's rally so by buying early last week and selling late, I am now out of the market for the rest of the month because I have used 2 IFT's already.
It won't be my intention, but that could lead me to be biased on the bearish side as I certainly don't want to miss a huge rally in October. But with the Dow still over 1000 points below the yearly highs, if I am wrong and we are making a bottom here, we should have plenty of time to make some money in November and December - two of the strongest months of the year historically. If you are in the stock funds now, I hope you do well without me - just not too well. Please leave me a little something.
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.
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.
