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Market Comments

May 12, 2008


TSP Fund share prices as of: 05/12/08
Fund - G Fund F Fund C Fund S Fund I Fund
12.43 12.21 15.77 19.05 23.82
$  Change - +0.00 +0.00 -0.11 -0.04 -0.28
% Chg day - +0.00% +0.00% -0.69% -0.21% -1.16%
% Chg 2008 - +1.22% +2.35% -4.77% -3.74% -3.80%
  L2040 L2030 L2020 L2010 L Income
17.69 16.98 16.35 15.38 13.52
$  Change - -0.10 -0.09 -0.07 -0.04 -0.02
% Chg day - -0.56% -0.53% -0.43% -0.26% -0.15%
% Chg 2008 - -3.02% -2.47% -1.80% -0.52% +0.37%

Today's Comments (Short Term Outlook)                             Printer friendly
Rally reached 2nd highest target

Stocks sold-off on Friday as bigger was not better.  The Dow lost 0.90%, the S&P dropped 0.70% and small caps gave up a modest 0.21%.  The I-fund shed over 1% despite the weakness in the dollar.

The S&P 500 is backing off of the overhead resistance and the PMO indicator is also turning downward toward a sell signal.  Support has held up so far for the upward trend of the recent rally, but any weakness this week and that trend is in jeopardy. 


                    Charts provided courtesy of www.decisionpoint.com - with analysis by TSP Talk

Back in mid-March I talked about being in a bear market, but I said that I "believe a playable rally is imminent."  It was, and I wish I had played it better.  I picked up a few percentage points but I was concerned that the rally would run out of steam sooner than it did.  My thinking was - best case scenario, the long-term trend line could be a where a rally could peak.  The 2nd peak goal was the 200-day moving average, which was achieved.  But I chickened as the S&P approached the faster moving averages. 

There can be explosive rallies in a bear market but it is tough to get overly aggressive when the indices are trading below the 200-day moving average.  We are starting to see a little bit of a breakdown now that we have rallied up toward the 200-day moving averages (simple and exponential.)  So, is the rally over, or is this a little pullback within the recent uptrend? 

The excessive bullish sentiment we talked about last week is a concern as that is what takes the steam out of rallies.  The overhead resistance is a problem.  The price of oil is out of control and is a big problem.  Late Friday FedEx cut i
ts expectations for fourth-quarter earnings, citing higher fuel prices and a weakened economy.  That is a concern.

With earnings season all but complete, and the Fed winding down the interest rate cuts, there could be lack of catalysts for stocks going forward.

It doesn't mean we will make new lows - although it is possible - but without a catalyst we could just chop around in a trading range with, with the low being about 1260 and the high being 1425.  Since the S&P is coming off of that high level and is now 1388, there is more room on the downside.  I am remaining cautious.

That's all for today.  Thanks for reading.  See you back here tomorrow.


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Prior Day's Market Comments (see archives in left column menu for earlier comments)
         
                    
05/09/08   

                  
Financials throw the rally a test

Stocks saw a modest rebound yesterday after Wednesday's 200-point sell-off.  We have seen a decent rally off of the March lows but the financials may get in the way again.

I mentioned yesterday that the S&P 500 is still below 200-day simple moving average (SMA), but I did not show the chart.  Here it is.  You can see that we are starting to see a reversal down off of that SMA but the 20-day exponential moving average acted as support yesterday.  The 200-day MA is obviously more of a force than the 20-day, but it's interesting to watch how the indices dance with these moving averages.


                    Charts provided courtesy of www.decisionpoint.com - with analysis by TSP Talk

The recent uptrend is still intact despite the sell-off on Wednesday, but we should be getting a little test of the lower end of that trend very soon.  After the bell yesterday, AIG reported a very weak earnings report and the financial sector should pay the price.  This will be the test.

The financial ETF, XLF, is in a similar situation as the S&P and today we may find out if the rally is strong enough to shrug off some bad news, or if this is the start of another move toward the lows.  By the way, AIG was down over 7% in after hours trading yesterday.


                   Charts provided courtesy of www.decisionpoint.com - with analysis by TSP Talk

The SentimenTrader.com confidence indicator shows that the "dumb money" indicator reached 67.  Anything over 60 is a concern.  In conjunction with the 60+ dumb money reading, we would normally look to see the smart money indicator move below 40 before we get a sell signal.  It is currently 50, so while this not a bullish sign for stocks, it is not an official sell signal yet.

 

                            Chart provided courtesy of www.sentimentrader.com

The TSP Talk Sentiment Survey system came in at a pretty bearish 0.75 to 1 bulls (38%) to bears (51%) ratio, which is historically bullish for stocks.  In the past this has been a decent time to buy, but this year these signals have not been very consistent. 

That's all for today.  Have a great weekend.



                             
Chart provided courtesy of www.sentimentrader.com

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