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Today's Commentary (Short Term Outlook)
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Keep'em guessing Stocks opened lower yesterday, but a relentless push higher throughout the remainder of the day gave the Dow a solid 132-point gain. The C and S funds each picked up about 1.1%, while the I fund gained 0.6%. Bonds also inched higher. The S&P 500 found some support at the 20-day EMA, which is typical in a bull market pullback, but the bounce off of support was quite powerful making me question whether this is temporary like we saw in September where a move to the 50-day EMA was the next stop, or if that is it for this pullback.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The two-day pullback was enough to fill the first of the four open gaps on the chart of the S&P 500, near 1075.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The next three open gaps are: 1058.02, 1016.48, and 905.84. Technically, the reversal pattern is obvious, but there was still a lower low and a lower high compared to Wednesday's action. The S&P will have to move above 1095 to break that, while holding 1074 on the downside. The market leader, Dow Transportation Index, also saw a reversal day, but it had been down much more severely early in the day yesterday, so its reversal only took it to break even on the day.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The fact that it, "the leader", did not make a new high on the last push up, and could not manage a gain yesterday could be a warning sign, but as we have been saying for months, while the market may be due for a pullback, you can't rule out a bullish outcome when the trend is obviously up and all of the moving averages are moving upward, and the faster EMA's are all above the slower EMA's. That is a bull market and we should expect bullish outcomes until something breaks down technically. That doesn't mean you have to be in the market. As we've said before how you approach it depends on your investment style. Buy and holders simply hold. Short-term market timers jump in and out based on indicators. And intermediate-term timers watch for breaks in the trend. Right now the buy and holder and the intermediate-term timers have not been given any reason to sell. The short-term timers may have sold near resistance looking for a move down to perhaps the 50-day EMA before jumping back in. The TSP Talk Sentiment Survey came in at 46% bulls, 41% bears for a 1.12 to1 bulls to bears ratio. That is below 1.25 to 1, hence a fresh buy signal for the system for next week. That will be the 11th straight week on a buy signal for the system. So, why am I still on the sidelines? I'm out of transfers. Speaking of transfers, did you read this?... One More TSP Transfer, Please! That's all for today. Thanks for reading. Have a great weekend! |