The market failed to continue its winning ways yesterday as the TSP stock funds dropped 3% to 4% on the day. Bonds could not capitalize on the weak equities as the F-fund dropped 0.5%.
The S&P 500 ended a 4-day winning streak with a significant pullback that took out Wednesday's low giving the index a lower low, and a lower high. That could mean a new short-term downtrend has begun.
Volume was very light and bonds were down so that does not really confirm a sell-off, but bonds were up the the prior day when stocks were up big, so I don't want to try to interpret this too much. I'll just keep watching over the next few days to see if this is becoming a pattern. I doubt the pattern will continue, so what it meant, I'm not sure right now.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
There is a little pattern going on with the PMO indicator above. We saw a PMO sell signal in September, the market turned down, and a couple of weeks later we got an oversold bounce. That same situation is happening now. Once again, the market seems to have given us an opportunity to sell a rally in a bear market.
The "dumb money" put/call ratios went from extremely bullish in early January (which is bearish for stocks) and the market pulled back sharply. The sell-off brought them closer to the overly bearish area (which is bullish for stocks) and we saw a 4-day snap back rally. The rally started moving them back toward overly bullish... and the cycle continues.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Speaking of bullish and bearish sentiment, the TSP Talk Sentiment Survey System gave it's first buy signal of the year after the 26% bulls, 58% bears, 0.45 to 1 bulls to bears ratio. Anything under 0.50 to 1 gives us a buy signal in a bear market (defined as the 50-day moving average being below the 200-day moving average.) The bear market rules put the system in a 100% C-fund allocation for all of next week. I can't help but wonder what the results would have been had the survey been taken on Wednesday instead of yesterday.
Last week I talked about bonds, in particular the 30-day bond, pulling back and breaking down. The drop was pretty quick and severe, so bonds had become quite oversold in the short-term. My thinking was that there were gaps and support areas that would probably be hit on the downside, but I also thought that we could see an oversold rally.
Yesterday the 30-year bond did not rally, but instead broke through the support of the descending wedge. I will give this another day or two to determine if this is a false breakout of the wedge pattern that will turnaround (good for bonds), which tends to happen, or if this is a sincere breakdown in which case we would want to avoid bonds.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The AGG, which is supposed to mirror our F-fund (although it does not always do that), also showed signs of support after the pullback, but there was also resistance overhead. Currently the AGG is holding above support so again, I will give it a couple of days to see what it can do here. A lower low would be the red flag.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We got some poor economic data and earnings yesterday, but after the bell Amazon.com did report strong earnings. The news can be good or bad, but it is still the charts and indicators that I watch, rather than reacting to the news. They keep out some of the daily noise creating by the news events, and hopefully keeps us from making decisions based on emotion.
That's all for today. Thanks for reading. See you tomorrow!!
The S&P 500 ended a 4-day winning streak with a significant pullback that took out Wednesday's low giving the index a lower low, and a lower high. That could mean a new short-term downtrend has begun.
Volume was very light and bonds were down so that does not really confirm a sell-off, but bonds were up the the prior day when stocks were up big, so I don't want to try to interpret this too much. I'll just keep watching over the next few days to see if this is becoming a pattern. I doubt the pattern will continue, so what it meant, I'm not sure right now.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
There is a little pattern going on with the PMO indicator above. We saw a PMO sell signal in September, the market turned down, and a couple of weeks later we got an oversold bounce. That same situation is happening now. Once again, the market seems to have given us an opportunity to sell a rally in a bear market.
The "dumb money" put/call ratios went from extremely bullish in early January (which is bearish for stocks) and the market pulled back sharply. The sell-off brought them closer to the overly bearish area (which is bullish for stocks) and we saw a 4-day snap back rally. The rally started moving them back toward overly bullish... and the cycle continues.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Speaking of bullish and bearish sentiment, the TSP Talk Sentiment Survey System gave it's first buy signal of the year after the 26% bulls, 58% bears, 0.45 to 1 bulls to bears ratio. Anything under 0.50 to 1 gives us a buy signal in a bear market (defined as the 50-day moving average being below the 200-day moving average.) The bear market rules put the system in a 100% C-fund allocation for all of next week. I can't help but wonder what the results would have been had the survey been taken on Wednesday instead of yesterday.
Last week I talked about bonds, in particular the 30-day bond, pulling back and breaking down. The drop was pretty quick and severe, so bonds had become quite oversold in the short-term. My thinking was that there were gaps and support areas that would probably be hit on the downside, but I also thought that we could see an oversold rally.
Yesterday the 30-year bond did not rally, but instead broke through the support of the descending wedge. I will give this another day or two to determine if this is a false breakout of the wedge pattern that will turnaround (good for bonds), which tends to happen, or if this is a sincere breakdown in which case we would want to avoid bonds.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The AGG, which is supposed to mirror our F-fund (although it does not always do that), also showed signs of support after the pullback, but there was also resistance overhead. Currently the AGG is holding above support so again, I will give it a couple of days to see what it can do here. A lower low would be the red flag.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We got some poor economic data and earnings yesterday, but after the bell Amazon.com did report strong earnings. The news can be good or bad, but it is still the charts and indicators that I watch, rather than reacting to the news. They keep out some of the daily noise creating by the news events, and hopefully keeps us from making decisions based on emotion.
That's all for today. Thanks for reading. See you tomorrow!!
