1/20/12
The rally continued as the Dow gained another 46-points yesterday. That's 16 positive days in the last 20, or 4 down days in the last 4-weeks as we head into the thick of the 4th quarter earnings season.
For the TSP, the C-fund was up 0.50% yesterday, the S-fund gained 0.59%, the I-fund added 0.68%, and the F-fund (bonds) lost 0.20%.
Not much more to report technical analysis wise as the trends remain intact.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The weekly chart shows how bullish the recent breakout was (above the blue triangle formation), but there is some longer-term resistance just above.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The NYSE overbought / oversold indicator is near +700. Not quite the +1000 bull market extreme, but high enough that it ended a few rallies in 2011.
I have shown the 10-day moving average of the put / call ratios several times, and it has been telling us how bearish the smart money was, and how bullish the dumb money has become. Interestingly, the dumb money have been more correct about the market in this case.
This chart is the daily put / call ratios and it swings much more than the moving average chart. This week's daily readings were all close to, or at 2011 highs. One day moves aren't usually too telling but when we see extremes it's worth noting.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The last time they were all this high was back in early 2011, just before a long 2 to 3 month rally was about to take a rest.
Despite a sharp intraday spike higher, the yield on the 10-year T-Note has stubbornly remained below 2.0% and the overhead resistance. Bond traders are clearly not very convinced that the economy is recovering. I would think that would have to change should the rally in the stock market continue, but the bond market is probably considered more "smart money" than the stock market.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We had a mixed bag of earnings after the close, although the majority of the big names came in strong with one exception, Google, which missed the mark and fell sharply after the close. IBM, Microsoft, and Intel were all up in after hours trading after better than expected reports.
The question is, since we've had a strong move higher leading up to the earnings, will the rally continue, or will we see a "sell the news" reaction - something we see very often this time of year when we're near highs, as we talked about on Thursday?
Surprisingly, despite the strong rally, the TSP Talk Sentiment Survey came in at 49% bulls, 42% bears, for a bulls to bears ratio of 1.20 to 1. That is a fresh buy signal in a bull market (anything under 1.26 to 1) which means the system will remain 100% S Fund for next week.
Thanks for reading! Have a great weekend!
Tom Crowley
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