Stocks rallied back yesterday recouping some of Tuesday's losses. The Dow gained 78-points, but resistance is overhead as we head into tomorrow's jobs report.
For the TSP, the C-fund was up 0.72% yesterday, the S-fund gained 1.07%, the I-fund added 0.12%, and the F-fund (bonds) lost 0.15.
The S&P 500 rallied back up to the 20-day EMA but could not reclaim that important resistance level. Support, once broken, tends to act as resistance.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
I don't have any data to prove it, but I have noticed over the years that a rebound such as we saw yesterday, of about 50% or more of the initial drop, can go either way from here. Had yesterday's rally fizzled quickly and closed off the highs I would have been much more leery of the bounce. But the fact that the index held onto the gains - near the 50% retracement of the losses, I believe there is a chance it is for real. But the 20-day EMA will have to be taken out again to confirm it. I would really prefer to see a decline down to the 50-day EMA before buying.
The smart money of the OEX put/call ratio has become significantly more bearish in the last couple of weeks; clearly expecting a pullback. Unfortunately that same reading meant little in January when we were in the early stages of the recent rally.
Chart provided courtesy of www.sentimentrader.com
If you recall however, we talked about how the bearish put/call ratio from the smart money seemed to be a pattern toward the end of the year - as you can see the indicator was near the lows at the end of 2009, 2010, and 2011. So perhaps the current bearish reading is a more meaningful reading as prior bearish readings during the year were much better indicators.
Thanks for reading! We'll see you back here tomorrow.
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Tom Crowley
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