|
| Today's Commentary |
|
Last
week of trading until the elections and FOMC It was a slow day for stocks on Friday as the Dow lost 14-points and the indices traded in a very tight trading range. The S&P floated between even and up two-points for most of the day.  For the TSP, the C-fund was up 0.24% on Friday, the S-fund gained 0.73%, and the I-fund added 0.08%. The F-fund (bonds) slipped 0.05%. For more on the weekly and monthly returns, please see our TSP Weekly Wrap-up. The S&P 500 has been chopping around for the last two-weeks and it is either consolidating and waiting for its next push higher, or it's running out if steam and is about to roll over. The problem is, we have minor evidence of both, yet no overwhelming indications for either.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The MACD in the chart above, is showing a strong negative divergence, which can be a sign of coming weakness, but that we is one of the few indicators that we follow that is really negative. At +77, the NYSE is neither overbought nor oversold at this time.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Investor sentiment is bullish, but our Sentiment Survey was still in neutral territory. We have seen some excess bullishness in other surveys (excess bullishness can be bearish for stocks.) The put/call ratios show the smart money is not overly worried, but neither is the dumb money. If there is one sentiment indicator that concerns me it is the Smart Money / Dumb Money Confidence Indicator from SentimenTrader.com.  When one of these indicators hits 60% while the other is below 40, you have yourself a signal. In this case the smart money is below 40 so if the dumb money climbs to 60 or more, it would be a sell signal. A continued rally into the elections might just push that dumb money confidence over 60. With the elections coming up, we could be heading for possible gridlock in D.C. if the republicans can take either the House or the Senate (which seems likely at this point) and the market would welcome it. Gridlock means fewer changes and more certainty on Wall Street. It is also possible that the market has already priced in a republican victory in the House. We also have an FOMC meeting next week where we could find out more about quantitative easing (QE 2), and that possibility has kept investors from doing a lot of selling as well. As I mentioned in this weekend's TSP Weekly Wrap-up, QE 2 is likely a having a big influence on the dollar, and it is the dollar that is really moving the market lately  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Perhaps we will see a "buy the news" reaction in the dollar ("sell the news" in stocks) if / when QE 2 is decided, so it could be interesting come next Wednesday when that announcement is ( or isn't) made, and Election Day is behind us. I am staying bullish at least until next week, unless we see some kind of a breakdown this week. The trend is still up and the moving averages are all behaving well, so why not expect a bullish outcome? Once the election and the FOMC meeting is over, I would be more likely to hit the sell button on any signs of trouble. But if history is any indication of what we could see after the mid-term election, we may not see a lot of trouble.
As I've posted before (and probably will again) since 1922, 19 of the last
22 post mid-term elections saw gains 90-days after Election Day.
Moreover, since WWII, 15 of the last 16 have been positive 90-days later
with an average gain of 7.8%. Those are some good odds for the market. |
Buy Low Sell High, Inc.
TSPtalk.com® is a trademark of Buy Low Sell High, Inc.
All Rights Reserved
Buy Low Sell High, Inc., P.O. Box 13213, Ogden UT 84412