11/18/11
Stocks sold-off again yesterday as Spain's 10-year bond yield is now flirting with joining the 7% club. The Dow did close nearly 100-points off of the low, but was still down 135-points on the day.
For the TSP, the C-fund lost 1.68% yesterday, the S-fund fell 1.71%, the I-fund dropped 0.96%, and the F-fund (bonds) added 0.12%.
The indices are now back in negative territory for the year, and with 6 weeks left in 2011, the streak of positive years during a president's 3rd year in office, going back to 1939, is in jeopardy if the market does not move up between now and December 30.
The Dow remained is a decent position - closing above the 50 and 200-day EMA's. Unfortunately, the Dow is not a great representation of the entire market.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The S&P 500 broke below the lower end of the triangle formation we have been watching. In just 2 days it went from being above the 20, 50 and 200-day EMAs, to being below all of them. Technically, this is a wreck, and a major warning sign to us. But here's where we have to work the plan we have put in place. Our plan has been to expect a breakdown from the triangle, and see it turn into a fake-out. It is a common outcome from these patterns.
We don't want to get too stubborn and marry this scenario. The fake-outs don't normally last too long so if the S&P 500 does not crawl right back into the triangle within 1 to 3 days, I will probably have to wave the white flag and give up on a bullish outcome and admit this is not a fake-out but rather a breakdown. And if that is the case, the chart will look really bad.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Taking a longer-term look, we are seeing an eerily similar situation unfolding compared to the breakdown this past summer.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
This is one reason why we can't wait more than a 2 or 3 days before abandoning the fake-out theory. If this plays out like the summer sell-off, we could be seeing a sharp decline within a few days of yesterday's breakdown.
Looking for some bullish clues as to why the decline won't happen and we can see the recently surging U.S. dollar has formed a rising wedge, which is a bearish formation (for the dollar), and is close to the apex and possible breakdown.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
If the dollar does breakdown from the wedge, it would likely be as a result of some positive news out of Europe, which would be a boost to U.S. stocks.
Today is the 14th trading day in November and as you can see, in the last 61 years the Thanksgiving rally gets ready to launch about this time of the month. Another possible bullish catalyst for stocks.
Chart provided courtesy of www.sentimentrader.com
On the negative side, our TSP Talk Sentiment Survey came in with a surprising bullish bias. After two big down days I would have expected a little more negativity from our readers. The bulls (49%) to bears (39%) ratio was 1.26 to 1. In a bear market this is a sell signal.
In a bull market a 1.26 to 1 ratio would be very close to a buy signal, but with the 50-day EMA still 12-points below the 200-day EMA, the system officially remains on the bear market rules side.
I am wondering if the results are being influence by the fact that our readers understand the contrarian aspects of the system and are now more apt to be bullish when things get bad - the opposite of what you would expect from a general survey. Have we become the smart money? I'm not ready to say that yet, but we do need to be flexible if we start seeing evidence that the system may no longer be a contrarian indicator.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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.
Stocks sold-off again yesterday as Spain's 10-year bond yield is now flirting with joining the 7% club. The Dow did close nearly 100-points off of the low, but was still down 135-points on the day.
For the TSP, the C-fund lost 1.68% yesterday, the S-fund fell 1.71%, the I-fund dropped 0.96%, and the F-fund (bonds) added 0.12%.
The indices are now back in negative territory for the year, and with 6 weeks left in 2011, the streak of positive years during a president's 3rd year in office, going back to 1939, is in jeopardy if the market does not move up between now and December 30.
The Dow remained is a decent position - closing above the 50 and 200-day EMA's. Unfortunately, the Dow is not a great representation of the entire market.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The S&P 500 broke below the lower end of the triangle formation we have been watching. In just 2 days it went from being above the 20, 50 and 200-day EMAs, to being below all of them. Technically, this is a wreck, and a major warning sign to us. But here's where we have to work the plan we have put in place. Our plan has been to expect a breakdown from the triangle, and see it turn into a fake-out. It is a common outcome from these patterns.
We don't want to get too stubborn and marry this scenario. The fake-outs don't normally last too long so if the S&P 500 does not crawl right back into the triangle within 1 to 3 days, I will probably have to wave the white flag and give up on a bullish outcome and admit this is not a fake-out but rather a breakdown. And if that is the case, the chart will look really bad.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Taking a longer-term look, we are seeing an eerily similar situation unfolding compared to the breakdown this past summer.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
This is one reason why we can't wait more than a 2 or 3 days before abandoning the fake-out theory. If this plays out like the summer sell-off, we could be seeing a sharp decline within a few days of yesterday's breakdown.
Looking for some bullish clues as to why the decline won't happen and we can see the recently surging U.S. dollar has formed a rising wedge, which is a bearish formation (for the dollar), and is close to the apex and possible breakdown.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
If the dollar does breakdown from the wedge, it would likely be as a result of some positive news out of Europe, which would be a boost to U.S. stocks.
Today is the 14th trading day in November and as you can see, in the last 61 years the Thanksgiving rally gets ready to launch about this time of the month. Another possible bullish catalyst for stocks.
Chart provided courtesy of www.sentimentrader.com
On the negative side, our TSP Talk Sentiment Survey came in with a surprising bullish bias. After two big down days I would have expected a little more negativity from our readers. The bulls (49%) to bears (39%) ratio was 1.26 to 1. In a bear market this is a sell signal.
In a bull market a 1.26 to 1 ratio would be very close to a buy signal, but with the 50-day EMA still 12-points below the 200-day EMA, the system officially remains on the bear market rules side.
I am wondering if the results are being influence by the fact that our readers understand the contrarian aspects of the system and are now more apt to be bullish when things get bad - the opposite of what you would expect from a general survey. Have we become the smart money? I'm not ready to say that yet, but we do need to be flexible if we start seeing evidence that the system may no longer be a contrarian indicator.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
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.
