Once again we saw the Dow fall while the broader indices performed much better. The Dow lost 44-points on Wednesday, the S&P 500 was up slightly, and the S and I-funds posted some solid gains. Bonds slipped.
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The S&P 500 (SPY) continues to test the December 31st highs, and since this is a rising trading channel, the chances of seeing a breakout and new highs look pretty good, but as I write this, the futures are down almost 0.5%. There are some reasons to believe that this is nearing a peak, but that is always the case. There's always indicators that are bullish while others are bearish. (We usually go over the indicators in our daily TSP Talk Plus Reports).
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq has been performing very well but it is pushing the top of its rising trading channel so there's some overhead resistance. Of course that resistance is rising so it doesn't necessarily mean its at a peak.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I saw Carter Worth on CNBC talk about this last week and since it's not always easy to find something interesting to talk about during a dull market, I thought I'd use it here. This is something I would normally reserve for just our TSP Talk Plus members, but I didn't want to deprive our daily commentary readers of this potentially useless information.
We have talked over the years about the magazine cover contrarian indicator. For example, if Time Magazine, or even an investing publication like Barron's, posts a picture of a big bull on their cover, or makes the main headline something very bullish in reference to the stock market, it has a tendency to mean that a market peak is not far off.
Now, how about the Hollywood Indicator? Almost every time a major motion picture is released with Wall Street / the stock market as the subject, the market tends to be close to a top. It's certainly not precise, but it is interesting.
In 2000, a movie called Boiler Room came out and it's premise was how anyone can become a broker and make gobs of money. Of course in 2000 we saw the pop of the Dot Com bubble.
In 2011 the movie Margin Call came out and I believe that was the year that we saw the last official 10% pullback. Of course Margin Call was not a movie that was bullish on Wall Street so it may not have been a contrarian indicator.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
In 1987 the movie Wall Street came out and of course we had a major market crash that year. The sequel to Wall Street came out in 2010 and that one didn't seem to have any major contrarian impact although there was a sharp sell-off in early to mid 2010.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Recently the movie, The Wolf of Wall Street was released so is this going to be the movie that becomes the contrarian indicator top?
By the way, there was another movie also called The Wolf of Wall Street and it was released in... wait for it...
.... 1929 (The Wolf of Wall Street (1929 film) - Wikipedia, the free encyclopedia)
Bonds pulled back yesterday and the TLT is testing some sharply rising support, while the IEF 7 to 10 year bond fund is up against resistance and so far losing the battle. The IEF is above the 50-day EMA and yesterday's pullback held there, so that is a positive, but the gaps are still open down below, and that is always a concern.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The yields rebounded and there are some interesting chart formations here. The 30-year yield (left) is in a possible falling wedge, which tend to break to the upside. Meanwhile the 10-year yield looks like it has formed a head and shoulders pattern.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
A head and shoulders pattern can be considered a continuation pattern of the larger trend, and for yields that trend would be up. But if the H&S breaks down below the neckline, it can be creating a major top.
Read more in today's TSP Talk Plus Report. We post more charts and indicators, plus discuss the Sentiment Survey Results and its TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php
Thanks for reading! We'll see you back here tomorrow.
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.
