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Looking good
Stocks rallied on Friday as the Dow picked up 66-points, the C-fund was
up 0.39%, the S-fund gained an impressive 0.72%, and the I-fund, hurt by
the rising dollar, was flat.
The S&P 500 remains within its trading range between 1083 and 1120. On
Thursday the index bounced off of the lower end of that range and it
appears to be heading for the top. We're still looking for a Santa
Claus rally to possibly break us through the top of the range, and while
there are some obstacles in the way, the recent five-week consolidation
has certainly helped set up that bullish scenario.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
The Dow Transports still look very good. We saw a breakout from a
triple / quadruple top and it has not closed below that level since.
The old resistance has joined forces with the short-term rising
trendline to give it a double dose of support, and the rebound on
Thursday and Friday may have initiating a new leg higher. This market
leader looks good, and that is good news for the rest of the market.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
The 10-day moving average of the NYSE ARMS
Index sank below the 1.50 level last week, and although I would have
rather seen 1.50 hold, the move down to 1.64 should turn out to be
another good buying opportunity.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
You can see that the ARMS Index has already jumped from that 1.64
level, hopefully on its way to a reading between 0.75 and 1.00, when we
may want to think about taking profits, assuming the market is up in the
interim.
Friday's action in the dollar probably took away any doubts that
this recent strength was anything but for real. Resistance has
been taken out and while it may just be a short-term rally, I would not
be surprised to see a move up to the 200-day EMA before it is done.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
Last week the I-fund dropped 2.3% and it was the only fund that closed
the week in negative territory. If this strength in the dollar
continues, I suspect the I-fund will continue to lag.
The
TSP Talk Sentiment
Survey System remains on a sell signal for this week after the bulls (62%) to bears (28%) ratio
of 2.21 to 1. It's the highest (most bullish, which is bearish for
stocks)
weekly ratio since December of 2007. It is also the second week in
a row that we have had a 2.0 to 1 ratio or higher. The last time
that happened was back in October of 2007. That it happened to be the week that the S&P 500 peaked
and the bear market began.
Either TSP Talk readers have become the new smart money, or we may have
a little problem on our hands. I find extreme sentiment readings
to be one the best indicators out there. I hope they are wrong
this time - at least until January. Not all surveys are as
bullish, however.
The AAII Sentiment Survey shows just 43% bulls and 35% bears for a 1.23
bulls to bears ratio, which is not overly bullish at all. This survey
has hit 2 to 1, 4 to 1, and even 8 to 1 bulls to bears ratios in this
decade, so after a 65% rally, a 1.23 to 1 ratio is not bad.
For this reason,
and for the reasons we talked about last week regarding late December's
bullish bias, I believe the market can continue to hold or rally into
the end of the year, but I do have some concerns for 2010.
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Thanks for reading.
We'll see you back here tomorrow.
Tom Crowley
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