Looking a bit sour

Stocks were down modestly on Friday, although for the second time in two days the indices closed well off of their lows.  The Dow slipped 14-points, and the TSP stock funds lost between 0.30% and 0.76%, while the F-fund was flat.

The S&P 500 remains in an uptrend and all three of the major exponential moving averages are rising and in good position with the 20-day EMA above the 50-day EMA, and the 50-day EMA above the 200-day EMA. 


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

The old lower trend line continues to be effective in indicating support and resistance levels.  Friday’s high could not get back above it, and the 20-day EMA held on the downside.  If you recall, on Friday we said we did not expect the market to be very volatile (on Friday) because of the options expiration, and sure enough the S&P traded in a pretty tight range – but that could change today.  Post-options expiration Mondays tends to let loose the pent-up energy that did not manifest on options Friday - up or down.

Taking a look at the market leader - the Dow Transportation Index - like the double top, it has indeed pulled back from the new triple top, despite triple tops' tendencies to break out to the upside.  I believe it needs to reverse back up this week or we could be looking at a full push down toward the prior low. 

                     

The small / mid-cap charts are looking slightly worse than the Transports as they may have already formed a new downtrend.  They did not make new highs, and this one is now looking like a bearish head and shoulders pattern.  (Are you digging the pink border?)

                     

The Housing Index is in a similar situation, although it is in even worse shape as we have seen a complete head and shoulders pattern, plus what appears to be a failed test of the head.  If this chart moves down to the neckline, a break could produce nasty results. 

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

Of course the Housing Index is important in that it could be a reflection of the future economic environment.

The NYSE overbought/oversold indicator has intrigued me lately as the highs and lows of the indicator seem to be greatly affected by whether or not we are in an uptrend or a downtrend.  During the bear market in 2007 – 2008, the +500 area was a pretty good indication that the rally was about to run out of steam, and the downside bottomed near the -1000 area.  Then the market bottomed and it flipped on us.  The indicator started to stretch to the +1000 level during rallies, and bottomed near -500.


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

During the last several weeks we have seen a change back to the +500 / -1000 range.  Whether or not this will translate into a new intermediate-term downtrend remains to be seen, but I am certainly taking a hard look at it, as you probably noticed, since I have mentioned it several times over the last several weeks.

A quick look at the dollar shows it has rebounded off of that double bottom low, while the longer-term resistance, which was broken, is now acting as support.  But it will have to deal with some serious overhead resistance near 76 where a more intermediate-term trendline meets with the 50-day EMA.


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

This is a holiday shortened week and as we talked about last week, the Wednesday prior to Thanksgiving and the Friday after, have some serious positive biases going for them, but next week gets a little suspect.  Go here to view the Historical Thanksgiving week chart from SentimenTrader.com.

Because of Thanksgiving, there will be no reports from myself or the premium services on Thursday and, unless something extraordinary happens on Wednesday or over the holiday, we will probably not produce new reports on Friday either.  But be aware that the TSP will be open on Friday and they will be accepting interfund transfers.  Monday will be the last trading day in November so beginning on Tuesday we’ll get a new set of transfers to play with.
          
Thanks for reading.  For more info on last week's action, and some thoughts on a gold TSP fund, check out our Weekly TSP Wrap-Up.  We'll see you back here tomorrow.