7/06/12
Stocks opened weakly on Thursday, tried with success to rally off the lows, but sputtered into the close. The Dow lost 47-points on the day.
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[TD="align: center"] Daily TSP Funds Return
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[TD="align: right"] G-Fund:
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[TD] +0.007%
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[TD="align: right"] F-fund:
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[TD] +0.14%
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[TD] - 0.47%
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[TD="align: right"] S-fund:
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[TD] - 0.07%
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[TD="align: right"] I-fund:
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[TD] - 1.11%
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Yesterday I mentioned that I had thought Thursday and Friday might not act like typical post-holiday action and we're more likely to see that after the weekend, but yesterday's action sure seemed like post-holiday action. Those holiday reversals see a move in one direction leading up to the holiday, and a reversal of that action after the holiday. So perhaps the overbought pullback has started.
The 20-day EMA has moved back above the 50-day EMA and I have noticed that when this happens, it is a sign that the market is overbought, and as we saw in some of the indicators I had posted earlier in the week, it is quite overbought. A pullback down to the 20 and 50-day EMA's would be healthy - if it holds.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The dollar rallied strongly yesterday filling the large gap that was left over last Friday. A couple of us talked about this on the message board a couple of months ago - whether a gap that closes another open gap, is actually considered an open gap. It's pretty rare so I don't have a lot of examples to go by, so we'll just have to see if the dollar wants to move down to fill this new empty gap, or if it satisfied the first gap and will continue higher.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
As we know, a rising dollar can be a drag on stocks while a falling dollar makes it easier for them to move higher.
The correction in May and June sent Over-The-Counter (OTC) market traders scurrying from high-risk penny stocks, which is what you might expect in a bad market. According to sentimenTrader.com:
"What is notable about the activity in June is just how slow the trading got. The total number of transactions dipped below 360,000 for only the 8th month since 1998, when that level started to serve as something of a minimum."
Chart provided courtesy of www.sentimentrader.com
So while the market is very overbought, the charts look good and we still have some ammunition for a decent rally this summer.
Jobs report today. Estimates are looking for a gain of 100,000 jobs and an unemployment rate of 8.2%. Volume will probably be light so if there are any surprises, things could move quickly.
Thanks for reading! Have a great weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.html
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