10/06/11
Stocks struggled out of the gate yesterday after the big Turnaround Tuesday, but the market found its footing and rallied strongly into the close. The Dow gains 131-points.
For the TSP, the C-fund gained 1.84% yesterday, the S-fund was up 1.91%, the I-fund added 1.54%, and the F-fund (bonds) lost 0.39%
The S&P 500 is now about 75-points (about 7%) off of the Tuesday low already after the two-day turnaround. We talked about the head and shoulders patterns yesterday, and the head and shoulders downside target (1090) has already been hit, but the bear flag is a still glaring ominous formation that we will have to deal with once this rally is over.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I see trouble for the rally in the area of 1175-1190, and once that is hit, the old bear flag support line should act as resistance. If we see the S&P wanting to test the bear flag downside target area, we are looking at somewhere near 1020.
Of course the bear flag isn't legally obligated to hit 1020, but the technical analysis has been pretty "text book" over the last few months so I will be more inclined to think that we will see new lows before the S&P closes above the 50-day EMA. I hope the market proves me wrong.
The Dow Transportation (market leader) had a big day yesterday gaining another 2.7%. It is now pushing against the 20-day EMA, but the 20-EMA hasn't had much influence on this index lately. It's the 50-day EMA that has acted as resistance during this bear market.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
As usually, the smart and dumb money put / call ratios have been on the opposite sides of the fence. When the market peaked in early May, the smart money was very bearish - as they usually are at market peaks, while the dumb money wasn't at peak bullishness, but they were more bullish than they are now (see blue arrows below.)
As the market drops, the smart money starts to lighten up on their bearish positions. This is how they are able to be the most bullish near market bottoms. As you can see the smart money has been trending up (more bullish) during this bear market, while the dumb money has trended down.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I'm guessing the smart money will read 1.0 to 0.75 about the time we get near a market bottom.
In the short-term (red arrows) we see the smart has spiked up which tells me they anticipated this recent rally and that it could go on for another few days. The dumb money was getting bearish just before the market rally - something that they are good at doing. That is, being too bearish before a rally, and too bullish before a decline.
Friday we get September jobs report and we know that can be a big market mover - but which way?
Also, the market is open for trading on Monday but being a federal holiday, the TSP will not process any transactions and won't update the share prices that day. That means your account will be in the same allocation on Monday and Tuesday. So, if you want to be in or out of the market on Monday and Tuesday, you will have to make the interfund transfer on Friday before noon.
I am terrible at trying to say the right thing during sad circumstances, but I just wanted to mention the death of Steve Jobs in today's commentary to show some respect to a man who really helped change the world. Rest in peace, Mr. Apple.
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.
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.
