9/28/12
Stocks rallied yesterday, mostly because the Spanish government unveiled its 2013 budget, which included substantial budget reductions and reforms. The Dow gained 72-points on the day.
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[TD="align: center"] Daily TSP Funds Return[TABLE="width: 154"]
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[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] 0.0029%[/TD]
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[TD="align: right"] F-fund:[/TD]
[TD="align: right"] -0.10%[/TD]
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[TD="align: right"] C-fund:[/TD]
[TD="align: right"] 0.97%[/TD]
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[TD="align: right"] S-fund:[/TD]
[TD="align: right"] 1.11%[/TD]
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[TD="align: right"] I-fund:[/TD]
[TD="align: right"] 1.24%[/TD]
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I zoomed out from my normally short-term look at the S&P 500 and noticed that the pullback found support in a very nice spot. Although it is a little lopsided, you can call this an inverted head and shoulders pattern and the breakout above the neckline may now have been successfully tested.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
It's too early to say, but this looks like a nice little pull back bottom being formed and the Nasdaq confirms that as it is back above the 20-day EMA already.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow Transportation Index is still at the bottom of its trading range and this has been a concern to me, particularly after the 50-day EMA moved below the 200-day EMA. So...
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I took a longer-term view and was surprised by what I saw. This is the monthly chart of the Transports and look at the huge inverted head and shoulders pattern (red)...
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The right shoulder looks to be about fully formed, and the bull flag (blue), should it breakout, could be the start of the inverted head and shoulders breakout.
I don't usually take a long-term look like this since I am more concerned with what is happening right now, and despite all of the headwinds the market and the economy seem to be heading into with the $16 trillion national debt, the new 1.3% GDP reading, the fiscal cliff coming in January, etc., this type of chart can certainly help keep me leaning toward the bullish side of this market when all else would make us think otherwise.
The dollar may be ready to end its recent bounce as the bear flag is running into the 20-day EMA.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
A breakdown in the dollar would help stock prices and confirm the bullish formations we are seeing in the charts. I don't know why things would be looking bullish - but they are. But don't forget, the market is a leading indicator. The good news will likely come after the rally making it tough for those who invest on rear-view mirror analysis.
Thanks for reading! Have a great weekend!
Tom Crowley
Posted daily at TSP Talk Market Commentary
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