Today's Comments (Short Term Outlook)                             Printer friendly

Bearish pattern faces strong open The 0.01% gain in the S&P 500 on Friday doesn't sound very impressive, but the index opened weakly, moved down nearly 1%, then finished strongly near the high of the day.  Now, as I write this Monday night, the S&P and Nasdaq futures up another 1%.  This leaves us with an interesting set up. We have a triangle, or pennant type formation coming to an apex.  Those are considered continuation patterns.  That means the breakout of this pattern should be in the same direction as the longer trend, which is obviously down.                                       Chart provided courtesy of www.decisionpoint.com  So, as it stands now (Monday night) we are most likely looking at a strong open for stocks today and that will test the upper end of this triangle.  The question is, will the resistance shoot the index right back down, or are the bulls strong enough to produce a breakout with staying power?  That is something we haven't seen in a while. Once the S&P breaks out above or below this apex area, there is support at 1318 and resistance at 1379 and 1396.  On the weekly chart you can see the head and shoulders pattern (LS = left shoulder, etc.)   The neckline is where we expected this market to encounter resistance and you can see that is still the case.                                     Chart provided courtesy of www.decisionpoint.com  Bonds (F-fund) have pulled back to below the 50-day moving average and the recent ascending bullish trend line.  Since stocks peaked in October, this has been a good area to be a buyer of bonds.  If bonds aren't up too much this morning, I may go head and move into the F-fund while continuing to wait for the stock charts to improve.                                     Chart provided courtesy of www.decisionpoint.com  Until stocks can break out of the downtrend I will continue to be cautious in the C, S and I funds.  Likewise, as long as bonds (F-fund) remain in an uptrend, they can continue to be played. The NYSE is slightly oversold and the investor sentiment is still bearish and our TSP Talk Sentiment Survey saw a 0.98 to 1 bulls (43%) to bears (44%) ratio.  That leaves that system on a buy signal and 100% S-fund allocation for this week.   That's all for today.  See you back here tomorrow. Have questions?  Visit our message board for answers.  Would you like to be on our email alert list?  We will send you an email when there is a change to our asset allocation or market outlook.  Your email address will never be given out.  Read our privacy policy.  By signing up you agree to the TSP Talk Terms of Service.  More details below **. Are you bullish or bearish?  Join the Weekly Sentiment Survey. Like what you're reading?  Tell a Friend about us.