Finishing up a choppy week, the indices gained some modest ground on Friday to end the week with some small gains. The Dow gained 61-points on the day as the bears have been unable to put any pressure on the bulls since the early October low.
[TABLE="width: 80%, align: center"]
[TR]
[TD="width: 300"]
[TD="align: center"] Daily TSP Funds Return[TABLE="width: 158"]
[TR]
[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] +0.0063%[/TD]
[/TR]
[TR]
[TD="align: right"] F-fund:[/TD]
[TD="align: right"] +0.09%[/TD]
[/TR]
[TR]
[TD="align: right"] C-fund:[/TD]
[TD="align: right"] +0.44%[/TD]
[/TR]
[TR]
[TD="align: right"] S-fund:[/TD]
[TD="align: right"] +0.07%[/TD]
[/TR]
[TR]
[TD="align: right"] I-fund:[/TD]
[TD="align: right"] -0.53%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 69%, align: center"]
[TR]
[TD="align: right"] [/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The S&P 500 (SPY) made a new closing high on Friday. Trend traders and buy and hold investors would look at this chart and say, what's not to like? Market timers may look at this and conclude that a pullback is due. They both may be right.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Trading volume dried up toward the end of the week last week, although on the Nasdaq there was above average because of earnings reports from some major technology companies.
The Nasdaq also made a new 52-week high on Friday, but I've noticed that these minor dips or "cups" that we have seen this summer and fall have been running out of steam and producing modest pullbacks before pushing to new highs.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The dollar has a big role in determining the share price of the I-fund, but I like to keep an eye on it for more reasons than that. With the Fed monetizing our debt with quantitative easing and the national debt nearing $17 trillion, it will at some point be a major issue for the financial system. As it now tests the 2012 and 2013 lows, there is a possibility of a breakdown.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We saw lower readings for the dollar during the 2008 financial crisis and even into 2011 when the Standard and Poor's lower the U.S. credit rating, but it is now looking over a precipice that if broken could challenge those lows.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I'm a little concerned that the Black Swan SKEW indicator above (Only shown on TSP Talk Plus), and the dollar looking over a cliff could be related and be cause for some serious concern in the coming months. Remember, the folks in Washington have to revisit the debt ceiling again in less than 3 months.
If the economy suffers any kind of hit, bonds would generally fair better than stocks. The bull flag on the intermediate-term (7 to 10 year) bond chart, which is holding above the 200-day EMA, makes bonds look attractive here, but there are some open gaps that could spoil any bond rally.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Fighting the Fed and the this bullish trend in stocks has been a losing battle all year, but there are some warning signs. Hopefully any kind of meaningful decline or even crash, (which is rare) will be preceded by some clues on the charts. We have a few warnings now, but there's always something you can look at to give the bearish side of the story. I know I lost a lot of money in 2008. I don't want to make the same mistake I did then, which was trying to "buy the dips" that didn't materialize until 2009.
Here we are at new highs and I sound bearish. Silly. But having not caught as much of the rally this year that I could or should have - like the Sentiment Survey System tried to tell me - I'd hate to make the same mistakes I made in 2008 if we do get a pullback that turns out to be something more serious. I'm not opposed to buying dips, but there could be something in the air that makes it "different this time."
In today's TSP Talk Plus report we go over some interesting developments in the the put / call ratios, and a follow-up on the "SKEW" indicator. 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
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