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| Today's Commentary (Short Term Outlook) |
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Almost pushing the limits Stocks pushed higher again, and while the gains were impressive, they did close well off of their highs again. But perhaps that is being too critical of a 131-point rally. It just tells us that someone was selling. Volume picked up from Monday's very low volume trading day, but it was still well below the volume we saw during the selling late last week. The TSP stock funds were up between 1.4% to 2.0%, with the I-fund leading the way as the dollar pulled back yet again. The F-fund (bonds) were down slightly. The S&P 500 has now successfully tested the support from the 50-day EMA and the rising support line. At least for now. The rally took a lot of investors by surprise as many of them have been anticipating a more significant correction after 6-months of big gains. Perhaps this move higher will be the capitulation of the bears.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The closer the S&P 500 gets to the upper resistance line, the more apt I will be to take profits. I don't want to see my recent gains fade away. As far as the rally continuing or breaking above the resistance; we are still seeing signs from the MACD that the trend may be weakening despite the rally. If the S&P 500 makes a new high and the MACD cannot get above its September peak, that will be a pretty good "get out while you can" signal for those trying to time this thing. Last week's sentiment survey told us that our readers may be getting too bearish, and that was a bullish sign for this week. So far that has played out. But will our readers shift gears in Thursday's new survey after this week's rally, or will they remain tentative? We'll see. Although the NYSE overbought/oversold indicator is back on the overbought side of the neutral line, it seems to have broken the 11-month rising trend. But the -500 oversold level has again proven to be a good spot to start buying.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk This has been a pretty good sign for the market. When the market rallies before the reading hits extreme oversold readings, it means investors are still buying the dips, and they are rushing in to do so, but how much longer can it last? The dollar had temporarily broken the downtrend last week, but that seems to have been a fake out as it has fallen sharply off of the short-term peak it made on Friday. It didn't even make it up to the 50-day EMA.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk On Friday we speculated that: "A rally up to the 50-day EMA for the dollar, currently near 78, should be enough to take the S&P 500 down to fill that open gap we mentioned above. If the dollar heads back down from here, it could send stocks higher without a test of the S&P's bullish support line." Well, we did get a rally but it did not quite make it up to the 50-day EMA, and because of that the S&P did not quite fill the gap (it fell about 3.5 points short). The problem with that is that it likely will get filled one day. With the rising wedge getting tighter and tighter and the overhead resistance getting closer, I am not going to get too greedy. I am getting close to taking the gains I made this week, and run. I may or may not decide to do that today, or I may move out slowly (remember, there are no limits on the number of transfers you can make while moving into the G fund). I'll just watch the action and take it day by day, but if we hit the top of the trading channel (1075-1080), I'll be out. If you recall, the 61.8% Fibonacci retracement of the market's peak in 2007 to the 666 low in March, would take this rally to the recent high near 1080. That's all for today. Thanks for reading. See you tomorrow! |