09/19/11
Stocks rallied again of Friday as the Dow added another 76-points. That made it 5 for 5 last week, the first 5-day rally since late June. But was the bullish action in the current bear market affected by options expiration?
For the TSP, the C-fund was up 0.57% on Friday, the S-fund added 0.09%, the I-fund slipped 0.23%, and the F-fund (bonds) picked up 0.05%.
For more on the weekly and monthly returns, please see our TSP Weekly Wrap-Up.
The S&P 500 remains in this huge bear flag, which looks quite ominous on the chart, but last week stocks were reaching toward the top of the flag again. The 50-day EMA is in play now and it is not easy for the S&P to get above the 50-day EMA in a bear market.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The recent rally certainly took me by surprise and I was trying to think of why we could be seeing this strength, and then it dawned on me that last week was an options expiration week.
Sometimes options expiration weeks act in a similar fashion to holidays in that what happens before a holiday (or options week), is often reversed after the holiday (or options week.)
You can see below that the action during the July and August options expiration weeks (red boxes) was reversed during the week after options expirations week (blue boxes). Does this mean last week's gains are in some jeopardy this week? Possibly.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The strength in the Nasdaq has been noticeable as the 50-day EMA was taken out last week. That is impressive, but now the more formidable 200-day EMA is in play.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq 100, the large cap technical stocks, has performed even better. It broke above the 20, 50, and 200-day EMA's last week. This is a very bullish sign, but you can see that there is resistance above at the top of a bull flag / rising wedge pattern. Both of those are bearish formations so we have an interesting situation here.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The market leader, the Dow Transportation index, is lagging a bit as it has not made a higher like like the Nasdaq, and it is still below both the 200 and 50-day EMA's. It was only up 3 of the 5 trading days last week, unlike the S&P and Nasdaq, which were up all five days, although Friday was pretty flat.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The put/call ratios are showing that the smart money (OEX green chart at the bottom) moved into a much more bullish ratio at 1.25 to 1. While this is an improvement, it is common to see this move up as the market moves down.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The smart money likes to be in the most bullish position possible at market bottoms, so I would anticipate this indicating moving up (on the chart - down in number) as the market falls, and when we do see a bottom, this indicator will be closer to 1.0 to 0.75.
The TSP Talk Sentiment Survey came in at 42% bulls, 43% bears, for a bulls to bears ratio of 0.98 to 1. That is close to a sell signal, but not quite. It is a neutral reading which means the system will remain 100% in the C-fund for this week.
Another thing to note is that today is the 12th trading day in September. You can see that the seasonality chart shows quite a negative stretch over the next several days.
Chart provided courtesy of www.sentimentrader.com
I had some issues with an upgrade of the message board software last night so you may see a different look until I can figure it out the problem. It's not you, it's me.
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 rallied again of Friday as the Dow added another 76-points. That made it 5 for 5 last week, the first 5-day rally since late June. But was the bullish action in the current bear market affected by options expiration?
For the TSP, the C-fund was up 0.57% on Friday, the S-fund added 0.09%, the I-fund slipped 0.23%, and the F-fund (bonds) picked up 0.05%.
For more on the weekly and monthly returns, please see our TSP Weekly Wrap-Up.
The S&P 500 remains in this huge bear flag, which looks quite ominous on the chart, but last week stocks were reaching toward the top of the flag again. The 50-day EMA is in play now and it is not easy for the S&P to get above the 50-day EMA in a bear market.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The recent rally certainly took me by surprise and I was trying to think of why we could be seeing this strength, and then it dawned on me that last week was an options expiration week.
Sometimes options expiration weeks act in a similar fashion to holidays in that what happens before a holiday (or options week), is often reversed after the holiday (or options week.)
You can see below that the action during the July and August options expiration weeks (red boxes) was reversed during the week after options expirations week (blue boxes). Does this mean last week's gains are in some jeopardy this week? Possibly.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The strength in the Nasdaq has been noticeable as the 50-day EMA was taken out last week. That is impressive, but now the more formidable 200-day EMA is in play.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Nasdaq 100, the large cap technical stocks, has performed even better. It broke above the 20, 50, and 200-day EMA's last week. This is a very bullish sign, but you can see that there is resistance above at the top of a bull flag / rising wedge pattern. Both of those are bearish formations so we have an interesting situation here.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The market leader, the Dow Transportation index, is lagging a bit as it has not made a higher like like the Nasdaq, and it is still below both the 200 and 50-day EMA's. It was only up 3 of the 5 trading days last week, unlike the S&P and Nasdaq, which were up all five days, although Friday was pretty flat.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The put/call ratios are showing that the smart money (OEX green chart at the bottom) moved into a much more bullish ratio at 1.25 to 1. While this is an improvement, it is common to see this move up as the market moves down.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The smart money likes to be in the most bullish position possible at market bottoms, so I would anticipate this indicating moving up (on the chart - down in number) as the market falls, and when we do see a bottom, this indicator will be closer to 1.0 to 0.75.
The TSP Talk Sentiment Survey came in at 42% bulls, 43% bears, for a bulls to bears ratio of 0.98 to 1. That is close to a sell signal, but not quite. It is a neutral reading which means the system will remain 100% in the C-fund for this week.
Another thing to note is that today is the 12th trading day in September. You can see that the seasonality chart shows quite a negative stretch over the next several days.
Chart provided courtesy of www.sentimentrader.com
I had some issues with an upgrade of the message board software last night so you may see a different look until I can figure it out the problem. It's not you, it's me.
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.
