No Deal = No Love For Stocks

07/29/11

Stocks rallied early yesterday but the trend this week has been for investors and traders to nervously sell during the afternoon trading. The indices closed mixed as the Nasdaq held onto a small gain, but the Dow lost 62-points.

For the TSP, the C-fund lost 0.31% yesterday, the S-fund fell 0.33%, the I-fund added 0.20%, and the F-fund (bonds) added 0.16%.

As you can see, every day this week saw late selling. The late money is generally considered the smart money so this certainly not bullish for the market. Of course under the circumstances, what can we expect?

The S&P 500 rallied up to the 50-day EMA and the broken short-term support line yesterday, but that was as far as it got. I'm not digging the action here but again, the debt ceiling negotiations are calling the shots and waiting for this cloud to lift seems to have been the best strategy so far. Those who gambled (guilty) have not been rewarded... ?yet?

Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The TSP Talk Sentiment Survey came in at 36% bulls, 55% bears, for a bulls to bears ratio of 0.65 to 1. That is another buy signal in a bull market so the system's allocation remains 100% S-Fund for next week. The system is up 4.83% for 2011 through Thursday's close.

I'll post the August seasonality charts again, and while August has some historical performance issues, I don't think seasonality is playing a big role right now...

Chart provided courtesy of www.sentimentrader.com

Chart provided courtesy of www.sentimentrader.com

Check your seatbelts and helmet straps. The next 3 trading days should be very exciting, if nothing else.

Thanks for reading! Have a great weekend!

Tom Crowley

 

[JTH]

I believe I heard a clip of the Standard & Poor's President stating regardless of the debt ceiling there was a 50% chance of a downgrade.

"S&P, which has given the U.S. a top AAA ranking since 1941, said on July 14 that the chance of a downgrade is 50 percent in the next three months and may cut the rating as soon as August if there isn’t a “credible” plan to reduce the nation’s deficit."

 

[Birchtree]

Why don't I feel anxiety yet? I haven't had the feelings of panic in a very long time - there must be something wrong with me.

 

[pmcint01]

Are you taking some pills for that?

 

[Birchtree]

No pills - it could be the 100% gain in the SPX since March '09 providing a comfort zone. Remember that stepping in front of the train can have its rewards. Back in late '08 and early '09 some of us made a killing out of a crisis by bargain basement buying.

 

[pmcint01]

I wouldn't mind getting in on the basement this time if there's a default

 

[JTH]

Although there is a high odds on a credit downgrade, a default is not in the cards. There will be no default, any such talk is more likely news-induced-fear.