2/21/13
Stocks saw their biggest decline in months yesterday after the Fed suggested they might slow or even stop buying bonds sooner than expected (i.e. kill the QE program). The Dow lost 108-points while we saw larger losses in the broader indices.
[TABLE="width: 88%, align: center"]
[TR]
[TD]
[/TD]
[TD="align: center"]Daily TSP Funds Return[TABLE="width: 164"]
[TR]
[TD]G-Fund:[/TD]
[TD="align: right"]+0.0050%[/TD]
[/TR]
[TR]
[TD]F-fund:[/TD]
[TD="align: right"]+0.02%[/TD]
[/TR]
[TR]
[TD]C-fund:[/TD]
[TD="align: right"]-1.24%[/TD]
[/TR]
[TR]
[TD]S-fund:[/TD]
[TD="align: right"]-1.83%[/TD]
[/TR]
[TR]
[TD]I-fund:[/TD]
[TD="align: right"]-0.73%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 80%, align: center"]
[TR]
[TD="align: right"]More returns[/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The last time we saw a sharp sell-off like this (earlier this month) the indices gapped open higher the next day and the rally resumed. This one however, saw the S&P 500 close below that narrow ascending trading channel for the first time since the December capital gains decline. So, is this one different?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Yesterday we talked about the milestones reached in the major indices and asked if these would be breakouts or fake-outs.
The S&P 500 had closed above the 1525 resistance line on Tuesday, but after just one day it is back below that resistance and back into the intermediate-term trading channel.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow had convincingly close above the 14,000 level on Tuesday, and yesterday it closed back below it at 13,927.
Chart provided courtesy of www.decisionpoint.com
The Dow Transportation Index had closed above the 6000 for the first time ever on Tuesday, and yesterday it closed at 5921.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
So, as of yesterday, this looks like Tuesday's action was a fake out, rather than a breakout. That could change today, but for now the risk / reward remains on the risky side as the indices remain on the high end of the trading ranges.
The housing data came in weaker than expected causing the Housing Index to lose most all of the gains it had made since January 4. This could be a problem since the stock market rally of 2013 has, in part, been a result of the stronger housing market.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The put / call ratios, which are a measure of the smart and dumb money, are still very fuzzy and that's the main reason I have not been posting this chart lately.
One of the dumb money ratios is the CBOE ratio, and it shows the dumb money as being on the bearish side - near levels seen just before the huge rally in January. That is usually a bullish sign.
The dumb money of the Equity put / call ratio was actually more bullish then they had been all year. That would lean toward being a bearish sign.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The smart money of the OEX put / call ratio have been trending lower since November, but that is not unusual while the market is rising. The smart money tends to be very defensive and well protected in their accounts as the market is rising and nearing a peak. But while the ratio trend is getting more bearish, the current reading is closer to being neutral than anything else.
The action yesterday brought up a situation that isn't all that common. The S&P 500 was hitting a 52-week high, then the up volume ratio dropped below 20% and hit the lowest level in 3-months.
According to sentimenTrader.com, here's what happened next in the past...
Chart provided courtesy of www.sentimentrader.com
Interesting, a year later, "The S&P was positive every time, averaging +17.6%."
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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.
Stocks saw their biggest decline in months yesterday after the Fed suggested they might slow or even stop buying bonds sooner than expected (i.e. kill the QE program). The Dow lost 108-points while we saw larger losses in the broader indices.
[TABLE="width: 88%, align: center"]
[TR]
[TD]
[TD="align: center"]Daily TSP Funds Return[TABLE="width: 164"]
[TR]
[TD]G-Fund:[/TD]
[TD="align: right"]+0.0050%[/TD]
[/TR]
[TR]
[TD]F-fund:[/TD]
[TD="align: right"]+0.02%[/TD]
[/TR]
[TR]
[TD]C-fund:[/TD]
[TD="align: right"]-1.24%[/TD]
[/TR]
[TR]
[TD]S-fund:[/TD]
[TD="align: right"]-1.83%[/TD]
[/TR]
[TR]
[TD]I-fund:[/TD]
[TD="align: right"]-0.73%[/TD]
[/TR]
[/TABLE]
[TABLE="width: 80%, align: center"]
[TR]
[TD="align: right"]More returns[/TD]
[/TR]
[/TABLE]
[/TD]
[/TR]
[/TABLE]
The last time we saw a sharp sell-off like this (earlier this month) the indices gapped open higher the next day and the rally resumed. This one however, saw the S&P 500 close below that narrow ascending trading channel for the first time since the December capital gains decline. So, is this one different?
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Yesterday we talked about the milestones reached in the major indices and asked if these would be breakouts or fake-outs.
The S&P 500 had closed above the 1525 resistance line on Tuesday, but after just one day it is back below that resistance and back into the intermediate-term trading channel.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The Dow had convincingly close above the 14,000 level on Tuesday, and yesterday it closed back below it at 13,927.
Chart provided courtesy of www.decisionpoint.com
The Dow Transportation Index had closed above the 6000 for the first time ever on Tuesday, and yesterday it closed at 5921.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
So, as of yesterday, this looks like Tuesday's action was a fake out, rather than a breakout. That could change today, but for now the risk / reward remains on the risky side as the indices remain on the high end of the trading ranges.
The housing data came in weaker than expected causing the Housing Index to lose most all of the gains it had made since January 4. This could be a problem since the stock market rally of 2013 has, in part, been a result of the stronger housing market.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The put / call ratios, which are a measure of the smart and dumb money, are still very fuzzy and that's the main reason I have not been posting this chart lately.
One of the dumb money ratios is the CBOE ratio, and it shows the dumb money as being on the bearish side - near levels seen just before the huge rally in January. That is usually a bullish sign.
The dumb money of the Equity put / call ratio was actually more bullish then they had been all year. That would lean toward being a bearish sign.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
The smart money of the OEX put / call ratio have been trending lower since November, but that is not unusual while the market is rising. The smart money tends to be very defensive and well protected in their accounts as the market is rising and nearing a peak. But while the ratio trend is getting more bearish, the current reading is closer to being neutral than anything else.
The action yesterday brought up a situation that isn't all that common. The S&P 500 was hitting a 52-week high, then the up volume ratio dropped below 20% and hit the lowest level in 3-months.
According to sentimenTrader.com, here's what happened next in the past...
Chart provided courtesy of www.sentimentrader.com
Interesting, a year later, "The S&P was positive every time, averaging +17.6%."
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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.
