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| Today's Commentary (Short Term Outlook) |
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Confused yet? Stocks blasted off on Thursday after a solid GDP report showed the economy grew in the 3rd quarter, slightly than expected. The Dow gained nearly 200-points and the TSP stock funds were up between 2.3% and 2.8%. If that is not exciting enough, CNBC can start to plan their next Dow 10,000 commemorative party as we are now just 38-points away. I knew we'd get another chance. But seriously, despite the huge day, the TSP stock funds are surprisingly still down for the week as the volatility remains quite high. 5 of the last 6 trading days saw triple digit moves in the Dow, and 8 of the last 12 saw at least a 90-point move. The S&P 500 has actually been holding up well. That is, the 50-day EMA did its job and the index bounce right off of it. Also, as we discussed yesterday, the NYSE overbought/oversold indicator and the ARMS Index were trying to tell us a bounce was due, but I'm not sure we could have expected what we got.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk We were concerned because the market leader Dow Transportation Index had broken down decisively earlier this week, and so far the S&P has not, but we thought it might follow along. But just looking at this chart and those two indicators, the bulls seem to still be in charge and the "buy the dips" bull market mantra is proving to remain true - so far. We've talked about this before, but someone on the message board reminded me of the 2003 market, which saw the S&P 500 continuously bounce off of the 50-day EMA during the rally off of the 2000-2002 bear market bottom. If you are looking for something even more positive, take a look at the similarities between the 2003 below and the 2009 chart above. After several successful tests of that 50-day EMA in 2003, look what happened from November '03 through January '04...  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Who knows how it will actually play out this time, but seeing the market rally so strongly despite being up so much leading up to October, is encouraging. Like we have been saying, the shorter-term traders could have used the pullback to the 50-day EMA as a good risk/reward buying opportunity, with the understanding that a break below it would mean a quick retreat. The problem was two-fold. While the 50-day EMA held on the S&P, the longer-term trend support line broke on Wednesday (although we don't act on a one day break). That, and the fact that the Transports were in worse shape technically and we thought the S&P could follow that path. It's never easy. The decision was easy for me since I was out of transfers for October. Hey TSP! If you are listening, can we please get One More Monthly Interfund Transfer... Please? The dollar broke out the other day and has now closed above the descending resistance line for 3 straight days. That's an official breakout, but that doesn't mean the downside won't continue. We will want to see a new high above the prior high (early October just below 78) and a move above the 50-day EMA.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Until that happens, the weak dollar / strong stocks trend will likely continue. If the dollar does show signs of a short to intermediate-term bottom, that will likely trigger a more serious correction in stocks. The TSP Talk Sentiment Survey came in this week at 37% bulls, 49% bears for a 0.76 to 1 bulls to bears ratio. That is quite a bearish reading considering the 200-point rally yesterday. That ratio also keeps the sentiment system on a buy signal for next week. That's all for today. Thanks for reading. Have a great weekend! |