5/03/12
Despite the Dow hitting a new high this week, this market really seems to be struggling to find direction. What happens at the day's open seems to give us no clue as to how it is going to close.
After Tuesday's early strength, the market fizzled in the afternoon. Yesterday (Wed.) stocks opened very weakly, but we saw strength into the close. The Dow lost 11-points on the day, but it had been down 80 in the a.m.
For the TSP, the C-fund was down 0.24% yesterday, the S-fund gained 0.19%, the I-fund fell 0.52%, and the F-fund (bonds) gained 0.17%.
These wild swings could be a sign of something big coming. Whether that is a correction or a breakout... I wish I knew. The indicators are mixed, and even our premium services seem to be split between buy and sell signals.
The early weakness in the S&P 500 yesterday, tested the rising support line and the prior April peak, plus the 20-day EMA came into play. That is a nice place for support and a good place for us to be watching for any signs of trouble.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Despite the price of oil breaking its downtrend, the Dow Transportation Index has formed an inverted head and shoulders pattern. As I mentioned the other day, H&S patterns are continuation patterns. In a bull market, they "should" break to the upside, and in a break market they tend to break to the downside. The problem with the Transports is that the index has been moving sideways for about 4-months. If I had to make a call I would guess it would breakout to the upside, but I wouldn't be surprised to see it fail either given the uncertainty in the indicators.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The overbought / oversold indicator is pulling back from a slightly overbought condition. +500 is not extreme reading in a bull market but you can see that it has not really gone much higher since early February.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Tomorrow we get the April jobs report and current estimates (through Wednesday) are looking for a gain of 162,000 jobs and an unemployment rate of 8.2%.
If you remember, last month the market was selling off before the March jobs report. The results came in on Good Friday, which was a market holiday, and it was worse than expected at +120,000 and 8.2%. After the holiday, the market rallied and that pre-jobs report low has not been broken since. I guess it was the bad news is good news deal so I don't know what kind of reaction to expect this Friday.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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