7/20/12
Stocks bounced around quite a bit on Thursday as investors are as uncertain as the indicators are telling us they are. The Dow gained 35-points but that was nearly 70-points off of the day's high, and it was also in negative territory at 3 or 4 different occasions during the day.
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[TD]Daily TSP Funds Return
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[TR]
[TD="align: right"]G-Fund:
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[TD]+0.004%
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[/TR]
[TR]
[TD="align: right"]F-fund:
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[TD]- 0.05%
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[/TR]
[TR]
[TD="align: right"]C-fund:
[/TD]
[TD]+0.28%
[/TD]
[/TR]
[TR]
[TD="align: right"]S-fund:
[/TD]
[TD]- 0.01%
[/TD]
[/TR]
[TR]
[TD="align: right"]I-fund:
[/TD]
[TD]+1.22%
[/TD]
[/TR]
[TR]
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[/TR]
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The market rallied despite another weak employment number. The initial jobless claims came in at 385,000, about 20,000 more than expected. This one year chart shows that the declining trend in jobless claims broke to the upside in April and that old upper resistance line of the downtrend seems to be acting as support now.
If we see 400,000 in the near future we would be looking at a new uptrend in jobless claims. Not good.
The S&P 500 pushed to a new high in July and volume picked up. There's not a lot of negatives in this chart, but as we mentioned yesterday, most of the market leading indices like the Nasdaq, Russell and Dow Transports, are not looking quite this good and that's a minor red flag.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The TSP Talk Sentiment Survey came in at 48% bulls, 42% bears for a bull to bear ratio of 1.14 to 1. Considering the strong bounce over the last week plus, this is still a pretty bearish reading (bullish for stocks). The system wouldn't move to a sell signal until that ratio hits 2.0 to 1. That is unless we move into bear market rules, but that wouldn't happen until the 50-day EMA moves below the 200-day EMA and I don't see that happening any time soon.
The AAII survey, a survey taken on another website (AAII: The American Association of Individual Investors) saw a much lower bullish percentage (thanks to one of our readers for pointing this out to me the other day.)
That survey came in at 22% bulls, and 42% bears for a ratio of 0.53 to 1. That means only 34% of those who said they were either bullish or bearish (as opposed to neutral) were bullish (22% of the 64% (22+42)). The excess bearishness is actually a very bullish sign for the stock market.
This chart below shows what happens after that ratio falls below 50% (this one was 34%) and the ratio was 10% below where it was during the prior survey, and at the same time the S&P 500 rallied 2% or more...
Chart provided courtesy of www.sentimentrader.com
Going back to 1987: One week out the market was just below average but looking out 1 month to 1 year, this was a great sign for the market with very few losses over that time.
Thanks for reading! Have a great weekend!
Tom Crowley
Posted daily at TSP Talk Market Commentary
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