11/27/12
Stocks were mostly lower yesterday but they did close near their highs of the day as the Dow, down over 100-points in early trading, closed down "just" 42. The Nasdaq and small saps closed in positive territory.
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[TD="align: center"] Daily TSP Funds Return[TABLE="width: 154"]
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[TD="align: right"] G-Fund:[/TD]
[TD="align: right"] 0.0114%[/TD]
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[TD="align: right"] F-fund:[/TD]
[TD="align: right"] 0.13%[/TD]
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[TD="align: right"] C-fund:[/TD]
[TD="align: right"] -0.20%[/TD]
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[TD="align: right"] S-fund:[/TD]
[TD="align: right"] 0.05%[/TD]
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[TD="align: right"] I-fund:[/TD]
[TD="align: right"] -0.10%[/TD]
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The Monday after Thanksgiving weekend says the S&P 500 is down about 58% of the time with an average return of -0.35%. Yesterday the S&P was down 0.20% so basically in line with historical returns.
The S&P 500 is below the 50-day EMA and needs a positive close today or it could be at risk of forming a flat top. Since September we've seen a few of these (short red lines) and if after 2 or 3 days or so, if a new closing high isn't made, it tends to produce another push lower.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Yesterday I showed a couple of reasons why the market could be in for some short-term trouble. Today we'll look at some of the more bullish readings.
A couple of sentiment type indicators are telling us that the "smart money" is very unafraid of this market and are in fact quite bullish.
Here's some info from our friends at sentimenTrader.com:
"Hedgers are the extremely large "smart money" traders who are using the futures market to hedge their day-to-day business risk. Generally, they use the futures to short the market [bet against], since their underlying business is mostly long-only.
"The rare times they go net long have tended to be good buy points for stocks, especially when it occurs in a generally uptrending market. The green arrows on the chart highlight the other times that has occurred since the March 2009 market bottom."
Chart provided courtesy of www.sentimentrader.com
They are not quite back to being net long, but the latest report showed a huge change in sentiment.
The smart money, according to the 10-day moving average of the OEX put call ratio, is as bullish as they've been since late 2010. I marked the prior instances where the indicator was below the 1.25 level, then moved to the 1.10 level (the numbers on the chart are inverted so small means more bullish). The end of the year can produce some inconsistent put / call ratio readings from the smart money so I'm not overly convinced by this one yet since we are close to December - even though it is normally one of my favorite indicators.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
These two smart money readings are encouraging, and add to that that many of the dumb money indicators are still quite bearish (which tends to be bullish).
Yes, there are some issues, but some of the indicators don't seem to be looking for too much damage if we do get any more downside action. This may be putting too much faith in our politicians to come up with a workable solution to the impending fiscal cliff.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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