TSP Talk - Thrift Savings Plan Strategies

Market Comments

January 28, 2010

Current TSP Share Prices

Today's Commentary (Short Term Outlook)

Hanging on

Stocks were sluggish for most of the day yesterday, hanging in negative territory until about 30-minutes after FOMC policy statement was announced. By the close, the Dow picked up 42-points, closing near the highs of the day.

The immediate reaction to the Fed's announcement took the Dow to -90 points, and while I was a little concerned, I knew it was the knee jerk reaction that does not always have much meaning.

The S&P 500 dove down to its next support levels at that same time, but it was able to quickly rebound off of those lows, and finally close in positive territory. We are certainly not out of the water, but I do like the set up we are seeing so far. Still, I think we need to see the market regain that 50-day EMA before I will feel comfortable. This could easily be a "dead cat bounce" that could quickly fail, but if we get back over the 50-day EMA, we'll have more support to work with.

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

I was looking at the chart of the small caps of the Russell 2000 Index. Yesterday's low was enough to fill the open gap left open back in December. This is a good place for a turn around, and by the close we did see a pretty good turn around.


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

The problem is that there is another large open gap down near the 580 area, and I don't think we really want to see that one get filled any time soon. And, if you notice, that open gap is sitting in the same area as the 200-day EMA, which makes it a pretty big downside target.

The chart of the dollar shows us that we have a new high, and with that new high, an official higher low was made. That puts the chart in a new uptrend, and it has now closed above the 200-day EMA for two straight days after a temporary pullback below it. This tells me that the C and S funds may outperform the I-fund in the short to intermediate-term.

                     Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
As for sentiment, the recent sell-off has taken the sentimeTrader.com's smart money / dumb money Confidence Indicator well off its extremly bullish readings in December. The last time I showed this chart, the dumb money indicator was 71 and the smart money was 38. It is now 50 and 46 respectively.


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

This turned a sell signal into a neutral reading. An official buy signal will not be given until the dumb money goes below 40, and the smart money moves above 60.

As I write this, President Obama is delivering his State of the Union address, and the good news is the market seems to be OK with what he is saying so far. The futures are up modestly with the S&P and Nasdaq contracts up 8 and 10-points respectively. Maybe we will see some follow-through to yesterday's rally, in the morning. Keep an eye on the 1110 area on the S&P 500. That's where the 50-day EMA is currently.

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

Tom Crowley

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