08/02/13
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Stocks rallied sharply on Friday as investors digested the Fed's policy statement and decided they liked what they heard. A couple of decent economic numbers in the morning didn't hurt any, and the Dow gained another 128-points.
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[TD="align: center"] Daily TSP Funds Return[TABLE="width: 155"]
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[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] +0.0057%[/TD]
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[TD="align: right"] -0.56%[/TD]
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[TD="align: right"] +1.26%[/TD]
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[TD="align: right"] S-fund:[/TD]
[TD="align: right"] +1.63%[/TD]
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[TD="align: right"] I-fund:[/TD]
[TD="align: right"] +1.00%[/TD]
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The S&P 500 popped above recent highs creating a new official rising support line. If you're a bull, this good news, unless this turns out to be a false breakout, and we'd probably need some kind of disappointing jobs report today (Friday) to that. With the Fed feeding the weak economy, we don't know exactly what kind of report will be good for stocks - a strong one or a weak one. Probably somewhere slightly above estimates will be just right.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
As great as yesterday's action seemed, the Dow barely made it above the Wednesday high, so it lagged a bit...
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transportation index, on the other hand, surged and led the way with a gain over 3% on Thursday. Being the market leader, give the bulls another check mark for this. This breakout is from a nice cup and handle formation, although the handle part is a little small compared to the size of the cup.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
SentimenTrader.com puts out a daily signal of the percentage of bullish readings in their indicators, versus the number of bearish readings. Right now 0% of the indicators are giving bullish readings.
Chart provided courtesy of www.sentimentrader.com
That would seem bad, but in 2013, it hasn't been a major factor. Stocks have continued to rise despite the indicators.
As RevShark pointed out in his commentary yesterday, it appears some bears are capitulating and jumping on the Federal Reserve Express (my term, not Rev's) as it has been frustrating sitting at the station waiting for a pullback. The question is, are we finally starting to see investors get too bullish?
Our TSP Talk Sentiment Survey does not suggest that as we got a neutral reading at 55% bulls, 38% bears. The AAII survey didn't suggest that either coming in at just 36% bullish, but only 25% bearish. That means nearly 40% said they were neutral, which is unusual.
And where are investors in the cycle of emotion? I think we're past "Thrill" for those who have captured this year's gain. But are we at Euphoria yet?
Chart provided courtesy of www.sentimentrader.com
We certainly saw more euphoria in the Dot Com days, but I think the 2007-2008 financial crisis left a mark on current investors, as they seem to less trusting of the market, and more concerned about preserving gains.
The longer-term bonds made new lows during Friday's stock market rally. Will we see a double bottom bounce here, or another leg down? Yields are testing the recent highs on the 10-year.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We get the July jobs report today (Friday) and consensus estimates are looking for a gain of 175,000 and an unemployment rate of 7.5%. Forum members can get in on the monthly Jobs Report Contest by going to: Jobs Reports & Contests
SentimenTrader.com had some if about how the market reacts after we see a 1% rally the day before the employment report...
"...of the 6 other times the S&P has rallied 1% or more to a 52-week high the day before a Nonfarm Payroll report, it has added to its gains on Friday, but for small gains...and it was lower the following Monday 5 of the 6 times. It will obviously depend on how the market interprets the Payroll report, but most likely we should see small gains at most, and then several days of flat to declining prices, leaving the risk level slightly elevated."
Administrative Notes: The Ebbchart System posted its final report this week. I want to thank Ebb for his dedication going back to 2006, and all of his subscribers for their support.
So that we are not leaving you high and dry, RevShark has offered to give free access to his TSP Timing premium service for everyone, through next week. You do have to create a login to gain access.
If you don't have an account yet, here's how to get started...
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Thanks for reading! Have a great weekend!
Tom Crowley
Posted daily at TSP Talk Market Commentary
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.
