11/19/12
Stocks saw some modest gains of Friday, reversing some early losses and improving the technical picture in some of the charts. The Dow gained 46-points on the day.
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[TD="align: center"] Daily TSP Funds Return[TABLE="width: 153"]
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[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] 0.0043%[/TD]
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[TD="align: right"] F-fund:[/TD]
[TD="align: right"] 0.03%[/TD]
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[TD="align: right"] C-fund:[/TD]
[TD="align: right"] 0.49%[/TD]
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[TD="align: right"] S-fund:[/TD]
[TD="align: right"] 0.91%[/TD]
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[TD="align: right"] I-fund:[/TD]
[TD="align: right"] -0.13%[/TD]
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The S&P 500 put in a positive reversal day but now faces some resistance as it tries to get back above the long-termer rising trend line (red).
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The current chart reminds me a lot of what we saw in May and early June where the major moving averages were broken, like they are now, and the 50-day EMA was quickly approaching the 200-day EMA, but the S&P bottomed and the 50-day reversed and headed back up without crossing the 200-day EMA. Right now would be a good time for the S&P to head higher to recreate that situation.
The Nasdaq 100 broke below its descending trading channel (blue) in early trading on Friday, and while this is not a good looking chart, the positive reversal day, which was also a positive outside day, could at least indicate an attempt to move back to the top of the trading channel.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The small caps of the Russell 2000 have really struggled, but again we see a positive reversal day and a positive outside day.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
An outside simply means Friday's low was lower than Thursday's low, and Friday's high was higher than Thursday's high. When that happens and the close is higher than the prior close, it can be a sign of a market reversal. It may not happen right away, although that is common, it certainly should occur within a few days in it in fact plays out the way outside reversal days normally do.
The dollar also put in a reversal day on Friday, but in this case it was a negative reversal day. With the 200-day EMA just underneath the UUP, support could be tested right away. A break below the 200-day would help stocks' attempt to see a relief rally.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The NYSE overbought / oversold indicator came off its lows on Friday. The low it made on Thursday was a pretty extreme oversold reading and prior readings that low have triggered imminent rallies over the last few years.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The recent Talk Sentiment Survey came in at 34% bulls, 59% bears, for a bulls to bears ratio of 0.58 to 1. That is a Buy signal which means the system will remain in a 100% S fund allocation for this week.
With many of the ducks lining up for a relief rally, it would be too surprising to see some negative action just to keep us from getting too comfortable. The market rarely gives us exactly what we expect and some heavy selling could send the nervous bulls running again, and that could be what triggers a rally.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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