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Getting
ready for a bigger move
Stocks were rocked
yesterday after more credit issues and production declines abroad.
The Dow lost 104-points and the TSP stock funds lost 0.79% to 1.89% with
the I-fund being the laggard after more strength in the U.S. dollar.
The F-fund was up 0.25%.
As we mentioned yesterday, a small
pullback would be healthy before any Santa Claus rally develops.
The pullback seems to have started yesterday as it was an
ugly day but there were some positives, believe it or not. The Dow
opened down sharply and made the low of the day just 15-minutes after
the opening bell. That level held, even after being tested later
in the afternoon. Not great news, but it does show us where buyers
seem to be willing to jump in.
The S&P 500
remains within its recent trading range and has now formed a very nice
little bull flag
formation, which is generally a bullish pattern, and tends to break to
the upside. It is not fully shown in this chart, but there is a
lot of support in the 1180 area as the 50-day EMA meets with the rising
trendline, plus there is the bottom of the bear flag trading range in
that same area.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
I know I keep harping on a few
specific charts, but the market tends to focus on certain issues at
different times, like oil a year or two ago, and right now the dollar
and the Transports are trying to call the shots.
The Dow Transportation Index (the market leader),
which broke out to the upside on good volume on Friday, pulled back some on Monday,
and a little more on Tuesday, but the 0.12% loss in this index was
nothing compared to the broader market losses, and it somehow managed to
close above that old breakout level near 4050 again. This is the
3rd close above that level, and that is pretty good confirmation that
this breakout might hold. Since the transports index is the market
leader, this would be a a good sign for the broader market as well.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
The Dollar rallied again
yesterday and also closed above its old resistance levels and 50-day EMA
for a 3rd straight day. This is putting pressure on commodities
and commodity related stocks, but the fact that the transports held up
well, and small caps are outperforming, this could be a good sign too.
Now we'll want to see if stocks can rally without the dollar falling.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
The NYSE overbought/oversold indicator has been coiling up a little
as it gets pressed into a tightening range. I am most interested
in which end breaks first; the +500 level, or the -500 level.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
The charts and indicators are in trading ranges and the
consolidation is a good thing for a market that has come this far, this
fast in 2009, but we know this economy is not out of the water yet.
That leaves a lot of uncertainty for the direction of the next bigger
move, but with the S&P 500 holding up very well technically (above EMA's
and trendlines, etc.), I am encouraged that the Santa Claus rally will
come in 2009. But I am not making any bets for January just yet.
So, as much as I am encouraged, and want to believe that Santa is coming
to give us a rally, some charts are looking a little "toppy". Look
at this rounded top in the EMW, which track our S-fund.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
I'll be watching the 20, and 50-day EMA on this chart for signs of a
potential breakdown. Small caps tend to do well in December and
January so if they fall through those EMA's during their strong period,
a more defensive plan will have to be considered.
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Thanks for reading. We will see you back here tomorrow.
Tom Crowley
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