Rebound - but a troubling sign persists

The Dow did a complete reversal of Tuesday's 142-points on Wednesday, mounting a 151-point rebound.  The Nasdaq and Dow Transports led the way, while the S&P 500 is still negotiating the 1200 level.  
                                      
For the TSP, the C-fund gained 1.50% on Wednesday, the S-fund jumped 2.11%, the I-fund added 1.04%, and the F-fund (bonds) fell 0.58%.

The S&P 500 was able to regain all of Tuesday's losses, climb back within the rising trading channel, but could not get above the 1200 level.  Mixed revues.


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

The two market leaders did make higher highs and it looks like the short-term trends are back on the positive side, but there is a case to be made that we could be see a bear flags, which would be bearish.  Mixed to positive.
                        
                       Charts provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Now, here's the problem.  I have been talking about this for a few days, and it keeps getting worse.  I know it's a holiday week and we could be seeing some strange activity, but this OEX put/call ratio and 10-day moving average is at or near alarming levels.
                        
                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

I don't believe it necessarily means we will see a market crash (although we could) but I think it says we could easily see a sharp pullback or correction in the not too distant future.  I just hope it comes after the holiday as the strong seasonality on Friday kept a lot of folks in the market to try to take advantage.
                                
Wednesday lived up to its historically strong seasonal reputation, and the data says look for more strength on Friday as well, but next week the seasonal advantage deteriorates.


                                  Chart provided courtesy of www.sentimentrader.com

Despite the severe bearish reading from the OEX put/call ratio smart money indicator, we saw a buy signal triggered for next week in the Sentiment Survey System when the bulls (41%)  to bears (49%) ratio hit 0.84 to 1.  Anything below 1.26 to1 is a buy signal in a bull market.  Tuesday's sell-off really spooked our readers.

If we don't crash on Friday, I think I will go against the Sentiment Survey System for a few days, and go with my original plan that I posted earlier in the week, which is to step aside for the beginning of next week.  Come Wednesday we get our new Interfund Transfers for December, and I'll have the option to buy in again at that point.  I do like to be in stocks toward the end of December, but not necessarily earlier in the month.
 
                                  Chart provided courtesy of www.sentimentrader.com

I am on the road over this Thanksgiving weekend so my updates may be brief on Monday if I get in late, and I may just pass on Saturday's TSP Weekly Wrap-up.

Thanks for reading!  Enjoy your holiday weekend!

Tom Crowley