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| Today's Commentary (Short Term Outlook) |
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The full leg Stocks started the day on the downside after earnings reports from Goldman Sachs and Citigroup were released, but by the close the buyers could not stay away and most indices closed on the upside. The C and S funds finished higher, while the I-fund and F-fund (bonds) closed lower. The S&P 500 is back riding the upper resistance line completing a full rebound off of the lower support and 50-day EMA. The trend is still intact and the market is making a victim of anyone who does not believe it.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Taking a look at the weekly chart of the S&P 500, we can see that longer-term resistance may be a force to reckon with in the near future as it sits in the 1130-1150 area, and the 200-week EMA is also at 1150. 1130 and 1150 are 3% and 5% above the current 1196 level respectively.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The market leader, Dow Transpiration Index, has not made a new high yet and while the trend remains up, there is some resistance here going back to the temporary peak made in October of 2008.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk This week's TSP Talk Sentiment Survey came it at 54% bullish, 32% bearish for a bulls to bears ratio of 1.69 to 1. Like last week, this is a new high for the ratio, but it is still a neutral reading for our bull market criteria. That keeps the system on a buy signal for next week. We are not really seeing overly bullish readings from any of our usual surveys; the AAII and the Investor's Intelligence Survey. Both are bullish but like the TSP Talk survey, nothing extreme yet. This may be what continues to feed the market. "They" say that there is a ton of money still on the sidelines and as long as there are non-bullish investors out there with cash , there is ammunition to keep things moving higher. We may need to see a 2.0 to 1 bulls to bears ratio before the buying subsides. As a reminder to those who may not know why excess bulls would be bad for the market and not good; sentiment is a contrarian indicator when it hits extreme levels. As an extreme example, let's say that 100% of those polled say they are bullish - everyone is a bull and believes the market will go higher. Sounds great, right? Well, if everyone is bullish, who is left to buy? Most bulls are already fully invested. They would be out of ammunition. But if only 40% of those polled say they are bullish, that leaves another 60% who are likely on the sidelines with cash. Cash that can buy stocks as they change teams. We have found that once that ratio moves to 2 to 1 bulls over bears or higher, the upside action tends to wane and we are more likely to get a pullback. Our survey, and the other surveys we watch, are all still below 2 to 1. That's all for today. Thanks for reading. Have a great weekend! |