Fatigue

Stocks had a tough time making much headway yesterday, but considering the reversal day on Tuesday, the action was not too bad.

As we talked about yesterday, we thought that Tuesday's negative reversal day may lead to selling on Wednesday, and stocks did open in negative territory.  But after trading in a tight trading range for most of the day, the indices did close at the highs of the day.  The Dow was up 13-points.  The tentativeness could be the result of the tax cut compromise not being embraced by all in congress keeping the extensions an uncertainty.

For the TSP, the C-fund added 0.40% on Wednesday, the S-fund slipped 0.14%, the I-fund gained 0.37%, while the F-fund (bonds) fell 0.27%.  

I think the intermediate-term view of the market looks good despite the S&P 500 looking a little tired here.  There is resistance all around it and that kangaroo tail reversal on Tuesday makes it look a little toppy, but I don't think any downside would be all that severe should it manifest. 
                        
                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Despite the big spike higher last week, the NYSE overbought / oversold indicator is basically neutral at +83, although the indicator has been sloping downward for a few months.  Until and unless that trend breaks, we could expect the overbought level to move lower and lower, and the oversold level to also get lower.  That is something we should watch.
                        
                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The dollar moved higher yesterday, hit the 200-day EMA and retreated again, although it did close up 0.13.  That is a reversal day similar to what we saw in the stock indices on Tuesday.  Of course the dollar trades around the clock so it is not really closed and as I write this on Wednesday night, the dollar is down to 79.72 continuing the reversal down.  
                        
                       Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
 
To my surprise, the 50-day EMA has held so far.  I had called for it to be taken out by the end of the week.  I still have two days. 

Another compilation indicator from SentimenTrader.com shows that 0% of their indicators are very bullish for stocks.  That sounds awful, and it is not the best news the bulls can hear.  But if you look at the prior instance of 0% bullish readings, the market didn't exactly rollover, although there were some pauses.

       
                                 Chart provided courtesy of www.sentimentrader.com

When the bearish readings hit the 0% level, that is a different story.  That IS a very good indicator that the market is about to take off, as you can see happened in July and September.

So this 0% bullish reading could mean we will take a little break sometime over the next couple of days or weeks, but I wouldn't get overly concerned about it.  I think there are more gains to be made in December, even if we do see a pullback at some point.

Thanks for reading!  We'll see you back here tomorrow.