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Bulls make their move Stocks rallied sharply yesterday as the Dow gained nearly 200-points and the indices picked up 2% or more. Fundamentally, I don't really get it. Technically, the S&P 500 broke out again. For the TSP, the C-fund jumped 2.08% yesterday, the S-fund gained 2.37%, and the I-fund was up 1.97%. Surprisingly, the F-fund (bonds) was also up 0.03%. I expected bonds to only move higher if stocks continued to pullback. I try not to listen to too much of the "noise" when it comes to financial news as the market doesn't always act the way I would expect it to. Yesterday we had a decent ISM report and Japan is doing their own form of quantitative easing, which apparently is good news for U.S. and worldwide stocks. What I see is the S&P 500 breaking back above 1150, and also above last Thursday's false breakout high of 1157. Somehow I knew that emotional sell I made on that day would come back to haunt me. Looking at the chart, it is very difficult to be a buyer here at the top of the new ascending trading channel, but the breakout could bring out the trend traders again as they do like to buy into new established trends. This higher high does it for them.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk While I am concerned about chasing at this level - the top of the trading channel, particularly after the 6-week spike higher - but I see that we had a similar steep 11-week rally from February to late April, so perhaps we won't see much of a pullback. This market seems to want to go up, and the strong reaction to what seemed like mediocre news at best, shows us that any excuse will do. As I have mentioned before, the upcoming elections could have a lot to do with this rally, and perhaps we shouldn't try to fight it. If the S&P can hold 1150 between now and after the release of Friday's jobs report (into Monday or Tuesday) then I think the bears will be in trouble. But if the bears can push the S&P back below the 1150 area, the bulls may start locking in profits again. At this point it remains a waiting game for me since I hate to chase, but I am considering using one of my IFT to put 10% or 20% into the stock funds just to be in the game. I don't want to have a perma-bear attitude but it is easy to do when you are not in the game. Putting a few chips on the table might stop me from looking for all the reasons this market should go down, and start looking for more reasons why I should try to take what this rally is trying to give us. The wild swings over the last few weeks have made it kind of tough. It's like trying to play poker with an wild player who has never played the game before. You can't get a good read on them because they play every hand the same way. In those types of games, everyone's chip stacks go up and down wildly. Sometimes you win. Sometimes you lose. Shuffle up and deal. With the Sentiment Survey System now up over 18% for the year, I wonder why I put myself through the emotional rollercoaster. I did not like the buy signal (100% S) it was on for this week, but it seems to be the correct allocation again. Thanks for reading! We'll see you tomorrow. Tom Crowley |
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