New high

Stocks rallied sharply on Monday as the Dow added over 130-points.  It was a good day for the TSP funds as the stock funds were up between 1.5% and 2.1% on the day, and even the F-fund added 0.38%. 

The bullish rally appears to be on as we saw a new high made in the S&P 500 as the index rallied off of the old resistance area, which seemed to act as support during the short pullback last week.

As we have been saying, it is tough to argue that this chart is not looking very good.  It's the other clues we are seeing in the other sector charts and indicators that have us a little spooked.


                  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The NYSE overbought / oversold indicator is back in the +500 area, an area that was difficult to move above during the bear market.  Let's see if the market can follow through on yesterday's gains now that it is above the +500 overbought level.
                
                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The weakness in the dollar continues to be a big story and we saw yet another lower low made yesterday.  The double bottom was penetrated and we may have to give it the 3-day rule to see if it is a real breakdown.  Either way, it looks like it is near support - but that support is descending.


                  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

We have talked about how a weaker dollar has been contributing to the rally in stocks this year.  Here is a chart of the S&P 500 going back to 1980.



Here is a chart of the S&P 500 priced not in dollars, but in the price of an ounce of gold.

              
                                                  Source: www.static.seekingalpha.com

Not quite as impressive.  This is basically saying that the weakness in the dollar made the S&P 500 appear much more valuable.  The dollar's weakness has made stocks and the price of gold move higher in value, so this comparison is quite interesting.  The price of an ounce of gold is now higher than the price of the S&P 500 (1139 vs. 1109).  It now takes 0.96 ounces of gold to buy the S&P 500.  The long-term average since 1980 is 1.74.  In July of 1999 it took over 5.5 ounces of gold to buy the S&P 500. 

Famous investment analyst Marc Faber, known for his uncanny predictions of the stock market and futures markets around the world, recently said, "I could envision a time when gold will sell for at least two or three times the value of the S&P 500." 

He is known as Dr. Doom, but if his prediction comes true, does that mean gold will be $2000 to $3000 an ounce while the S&P remains near 1100, or will the S&P move down to 350 - 400 while gold remains near 1100?  Perhaps something in between the two.

Thanks for reading.  We'll see you back here tomorrow.