Wedge breaks but holds by the close
Stocks bounced around early yesterday, but went into a funk until the last
hour of trading before the dip buyers finally showed up. The Dow
slipped 1.51 on the day, and most stocks were also down on the day.
For the TSP, both the C-fund and the S-fund lost 0.36% yesterday, while
the I-fund jumped 1.15% with the help of the weak dollar. The F-fund (bonds)
dropped 0.25%.
The midday weakness in stocks yesterday, took the S&P 500 back into the
rising wedge we have been watching closely, but a last hour rally took it
back above that old resistance line. Resistance, once broken, does
tend to act as support.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
The market leaders (Transportation Index and Nasdaq) are telling the same
story: The trend is up, the pullbacks probably need to be bought
- at least until we see a break in some key support levels.
The first level of support would be the upper end of the rising wedges, the
next would be the lower end of the wedge, which is a more intermediate-term
area of support, and then we move to the 20 and 50-day EMA's.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
The Nasdaq
looks similar, and even more encouraging here is the intraday dip yesterday
seemed to nearly fill the 5-point gap left open after Wednesday morning's
gap up opening.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
As we might expect, the dollar had a hand again, in stocks
holding up.
As long as the dollar is falling, at least in the short-term, stocks should
be able to keep from breaking down. If the dollar does start to rally,
breaking its recent steep downtrend, I would expect stocks to begin to
finally pull back.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
The TSP Talks Sentiment
Survey came in at 51% bulls, 36% bears for a bulls to bears ratio of
1.42 to 1. That is getting a little higher than we've seen since the
market peaked last April, but it is still below the system's sell signal of
2.0 to 1, so the system remains on a buy signal and 100% S-fund for next
week.
The system is now up over 20% in 2010.
Thanks for reading! Have a great weekend!
Tom Crowley
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