Stocks took a well deserved break yesterday after the very impressive Santa Claus rally. The best since 1974, so I hear. And the "pause" wasn't all that bad as small caps actually closed higher yet again. But oh brother, stocks are sure stretched to the upside now.
The S&P 500 pulled back slightly but did manage to stay above that descending trend line and the 50-day moving average. So far so good, but the short-term indicators are not on the side of a continued rally - at least in the short-term.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The NYSE overbought/oversold indicator is more overbought than any time shown on the chart, which goes back three years.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The "dumb money" put / call ratios, the CBOE and Equity, are also stretched to levels not seen since some of our longer-term market peaks. The rubber band is getting tighter.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
If there is, or was a positive, it was that the AAII Investor Sentiment Survey came in quite bearish last week (which is bullish), after the early December weakness, and mostly before the Santa Claus rally began.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
So, while we could have taken advantage of this overly bearish reading before the rally got into high gear, I have a feeling that the recent strength will bring last week's 0.44 to 1 bulls to bears ratio closer to 1.0 to 1.0 during this week's survey. That's just speculation of course, and if the market does fall in the next day or two, the survey, which is given on Wednesdays, may just stay overly bearish. I have noticed that in this survey, and in our own sentiment survey, the current day's action has a large impact on the results.
You may have noticed that the I-fund dropped 1.26% yesterday and now trails the C and S funds by about 2% after just two days of trading this year. The main reason is the recent resurgence of the U.S. dollar.
But the charts are telling us that the dollar could run into some trouble here. It has finally filled the gap created during the shellacking that the dollar took in mid-December. It bounce above the 50-day moving average and ascending resistance line yesterday, but closed below them.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We'll have to see if dollar can keep the upside momentum going. The PMO is starting to turn higher, but we're not quite seeing a buy signal yet.
With interest rates so low and liquidity so high, you would not expect the dollar to be particularly strong, but the European Central Bank may have been given the green light to drop their interest rates because of benign inflation numbers and weak economic reports in Europe. So it's not so much of a case of a strong dollar, but weakness in the euro, so even though the chart shows a little roadblock, perhaps the dollar can keep the rally going?
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That's all for today. Thanks for reading! We'll see you back here tomorrow.
The S&P 500 pulled back slightly but did manage to stay above that descending trend line and the 50-day moving average. So far so good, but the short-term indicators are not on the side of a continued rally - at least in the short-term.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The NYSE overbought/oversold indicator is more overbought than any time shown on the chart, which goes back three years.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The "dumb money" put / call ratios, the CBOE and Equity, are also stretched to levels not seen since some of our longer-term market peaks. The rubber band is getting tighter.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
If there is, or was a positive, it was that the AAII Investor Sentiment Survey came in quite bearish last week (which is bullish), after the early December weakness, and mostly before the Santa Claus rally began.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
So, while we could have taken advantage of this overly bearish reading before the rally got into high gear, I have a feeling that the recent strength will bring last week's 0.44 to 1 bulls to bears ratio closer to 1.0 to 1.0 during this week's survey. That's just speculation of course, and if the market does fall in the next day or two, the survey, which is given on Wednesdays, may just stay overly bearish. I have noticed that in this survey, and in our own sentiment survey, the current day's action has a large impact on the results.
You may have noticed that the I-fund dropped 1.26% yesterday and now trails the C and S funds by about 2% after just two days of trading this year. The main reason is the recent resurgence of the U.S. dollar.
But the charts are telling us that the dollar could run into some trouble here. It has finally filled the gap created during the shellacking that the dollar took in mid-December. It bounce above the 50-day moving average and ascending resistance line yesterday, but closed below them.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We'll have to see if dollar can keep the upside momentum going. The PMO is starting to turn higher, but we're not quite seeing a buy signal yet.
With interest rates so low and liquidity so high, you would not expect the dollar to be particularly strong, but the European Central Bank may have been given the green light to drop their interest rates because of benign inflation numbers and weak economic reports in Europe. So it's not so much of a case of a strong dollar, but weakness in the euro, so even though the chart shows a little roadblock, perhaps the dollar can keep the rally going?
Two 2 days left! Annual subscriptions to the Premium Services are on sale through January 7. Click here for more info, or click here to get started and enjoy immediate access.
That's all for today. Thanks for reading! We'll see you back here tomorrow.
