4/13/12
Stocks followed through on Wednesday's rally yesterday as the Dow added another 181-points onto Wednesday's +89 for a two day gain of 270 - the largest 2-day gain of the year.
For the TSP, the C-fund was up 1.38% yesterday, the S-fund gained 1.72%, the I-fund made 1.33%, and the F-fund (bonds) slipped 0.02%.
The S&P 500 seems to have found support and has now moved back above the 50-day EMA, although it is now testing the 20-day EMA.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
One of the more common mistakes I have made over the years is sell a rebound after a sell-off too early. When I am in the stocks funds and the market takes a dive like it did recently, I tend to sell on the first sign of strength as the relief of getting back some of those losses over takes the desire to make more money.
I am seeing a mixed bag in some of the charts and indicators right now and I am not sure exactly what to do right now. There are a few charts that are hitting resistance now so if today (Friday) the rally can continue, it may be a good sign. Let's go over some of the good and bad.
On the negative side, the S&P 500 is hitting the 20-day EMA, and the small caps of the Russell 2000 are testing the 50-day EMA. This chart below may have put in a double bottom with the March and April lows, but the 50-day EMA must be taken out. There are 2 open gaps above the index, and one down below.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
On the positive side, the smart money OEX put/ call ratio recently hit it most bullish level of the year. When the smart money is bullish, then tends to be bullish for the market.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The dumb money of the CBOE put/call ratio recently made its most bearish reading of the year. When the dumb money is bearish, that also tends to be bullish for the market.
The problem with those two readings is that neither are extreme. These put/call ratios work better when near extreme readings.
The AAII investor Sentiment Survey (not our survey) is taken on Wednesday and judging by the results, probably early on Wednesday morning before the bulk of the big two-day rally hit.
The 28% bulls / 42% bears created the lowest (most bearish) ratio since last fall when the market was trying to find a bottom from the summer correction. This would be a very bullish sign, but the big two day rally takes a little steam out of this bullish indicator.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
What happens when you take a survey after the 2-day rally? You get results like we saw in our TSP Talk Sentiment Survey this week. The survey came in at 63% bulls and 26% bears, for a bulls to bears ratio of 2.42 to 1. That is a far cry from the bearish AAII results. The 2.42 to 1 ratio actually created a sell signal in our sentiment system as it will be moving to a 100% G fund allocation for the week of 4/16/12 - 4/20/12.
That's a lot of mixed info and tough to call. Like I said, the next couple of days may help because if the S&P 500 and the Russell 2000 can take out there resistance, we may have to be patient and see how much more the bull market has in store for us. But if we start seeing the indices back off from resistance here, it could be a concern.
Thanks for reading! Have a great weekend!
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.
