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| Today's Commentary (Short Term Outlook) |
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Is the rally done, or just
getting started? Friday was an interesting day and after all was said and done, the Dow gained 17-points and the S&P 500 closed higher for the 5th consecutive day. The jobs report was released at 8:30 AM ET on Friday, and the initial reaction was negative in the futures market and later when the stock market opened. Within minutes of the open, the Dow sold off about 70-points, but almost as quickly as it went down, it rebounded back into positive territory. The remainder of the day was less exciting as the indices traded in a pretty tight range until the close.  The C-fund closed up 0.26% on the day, the S-fund lost 0.13% and the I-fund shed 0.04%. The F-fund (bonds) we up 0.14%. Pretty tame action for a jobs report Friday. Plus volume was quite light. The S&P 500 continues to press up against the old support line that has turned into resistance. My instincts are telling me that this rally may not end as well as the others but - and this is very important - my instincts are terrible and that is why I don't trade based on my "gut".  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The resistance is a concern but many of the indicators are telling us we may have more upside to go. That can happen, AND my gut could be right if the head and shoulders pattern that we talked about on Friday continues to form. This is speculation of course, but if we do see a bearish head and shoulders pattern, the right shoulder (RS) could potentially move up as high as 1080 or even slightly higher, before moving back down toward the alleged neckline.  Charts provided courtesy of www.decisionpoint.com, analysis by TSP Talk The Transports are trying to keep us on our toes. We are looking to the Dow Transportation Index as the leader and while it had broken down to a lower low early last week, it has since found support at the 200-day EMA and has rallied back above both the 50 and 20-day EMA's.  Charts provided courtesy of www.decisionpoint.com, analysis by TSP Talk This is not yet an "all's clear" sign but you can see above how powerful the 200-day EMA can be whether it is acting as resistance or support. The thing now is that the Transports basically have to make a new high or a new downtrend is all but certain. Of course we could also be seeing the start of a trading range as we saw between May and August. We looked to the renewed accuracy of the NYSE 10-day moving average indicator to help us pick the bottom of this recent pullback, and now that we have a little rally off of that area, is it time to take profits?  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Perhaps, but as we know, the market has rallied off of the 1.50 area during this whole bull market move, but since June the rallies have continued even after the ARMS index reached 1.25, about where it is now. So this is yet another test for the market. If it starts to stall here, we could be seeing a change in character, but right now stocks are innocent until proven guilty. The TSP Talk Sentiment Survey came in at 54% bulls, 34% bears for a ratio of 1.59 to 1. Quite a change from the 0.76 to 1 bulls (37%) to bears (49%) ratio the prior week, and despite being a neutral reading, it is on the higher end (overly bullish) of the range from what we have seen over the last couple of years. I'm a little concerned that the passing of the healthcare bill in the House this weekend might spook Wall Street a little, but as I write this on Sunday night the futures are holding in positive territory. Once again I have a small gain during the early part of the month and as I did in October and, at the risk of using my final transfer in November, I may be looking to book some gains some time this week in case things head south toward the middle or latter part of the month. See this weekend's TSP Weekly Wrap Up for more on that. That's all for today. Thanks for reading. We'll see you back here tomorrow! |