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| Today's Commentary (Short Term Outlook) |
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Hoopla! Stocks rallied strongly on Wednesday following the lead of Intel as their strong earnings report was seen as a positive for the broad market in the coming earnings season. The Dow broke the "magical" 10,000 level and the media is all over it. Maybe it is because I am currently on the sidelines, but I am having a hard time listening to all of this Dow 10,000 hoopla. CNBC actually had a half hour special show on Wednesday night to commemorate the crossing of 10,000. While the direction the market moving is excellent news for investors, somebody needs to remind CNBC that the Dow has crossed above and below Dow 10,000 no less than 50 times since it first did so in 1999. I had mistakenly reported on Tuesday that it first happened in 2003, forgetting that it actually occurred way back in 1999 - ten years ago.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk It is certainly a psychological number, but it is more apt to bring in the "dumb money" as the news reports on it as if it is a green light for the market. If someone hasn't made any money in 2009 this may be enough for them to capitulate and finally buy. Meanwhile, guess who is more likely taking profits during this euphoria? Perhaps the smart money. That is just speculation, but I guess we'll find out a little more about sentiment from today's Sentiment Survey. The S&P 500 is back riding resistance, and yesterday's big 1.8% gain was on higher volume, mostly because of the good news from Intel, but also because of the 10,000 hype. The PMO is back on a buy signal as it passed its 10-day EMA.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The market has made a liar out of me over the last few months as I keep insisting that open gaps tend to get filled sooner rather than later. Well, we now have 4 open gaps on the S&P 500 chart and the earliest goes back to July. The S&P closed yesterday at 1092 and the current open gaps are: 1075.30 1058.02 1016.48 905.84 Some of these gaps are larger than others, but I expect most, if not all of them, to eventually be filled. Whether that happens this month, or two-years from now, I don't know, but it is a rare occurrence to have a long lasting open gaps on the S&P 500 chart. Yesterday I mentioned that Intel can be tricky for the market. I said that many times the market reverses after a big market moving event from Intel. Thankfully, our friends at Sentimentrader.com wrote about just that so it helps me give you a visual. These guys are great with historical data and stats. From Sentimentrader.com, talking about the last 13 times that Intel popped up 3% or more during earnings season and the S&P 500 futures gapped up to a new one-year high, or within 3% of a new high the next morning... "...From the opening gap to the close two trading days later, the S&P was positive only 1 time (and that little bugger gave back all its gains the next day). The S&P's average return during that span was -1.4%, with a maximum gain that averaged only +0.4% and a maximum loss that averaged -2.3%. In only 1 case did the S&P gain more than +0.75% at any point from the open to the close two days later, but it lost more than -0.75% at its worst point all but 2 times.
In other words, the risk/reward was extremely - and consistently - skewed to the downside. Here's the table:"  Data provided courtesy of www.sentimentrader.com What does this tell us? Well, it tells me that CNBC may have to make plans for another Dow 10,000 party in the coming weeks. Those of you that are subscribers to EbbChart's premium service know that the system had a green-green-green pattern for yesterday. That is a bullish pattern and has been popping up for big positive days for the market lately. Unfortunately, it has also popped up during a few big down days as well so it seems to be a pretty good indicator that the market is going to be volatile that day - usually up, but sometimes down. Why does that matter? Because we have another triple green pattern today, and another on Monday. So, I wouldn't be surprised to see the volatility continue over the next few trading days. I just don't know if these next two green pattern days will be up or down. I have not yet updated the TSP fund share prices on TSP Talk, including the AutoTracker, because as of this writing, the posted share price on tsp.gov for the I-fund is listed as "N/A", which also affects the share prices of all of the L-funds since they include pieces of the I-fund. Hopefully, by the time you read this, the TSP will have straightened out their problem. I will update our information as soon as the TSP posts the correct share price. That's all for today. Thanks for reading. We'll see you back here tomorrow. |