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Market Comments

March 23, 2011

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Today's Commentary

A day of rest and resistance

It was a quiet day on Wall Street as the indices saw modest losses on light volume. An 18-point loss in the Dow does not seem all that bad after a 423-point rally during the prior 3 trading days.

For the TSP, the C-fund lost 0.34% yesterday, the S-fund fell 0.53%, the I-fund inched up 0.02%, and the F-fund (bonds) lost 0.08%.
The light volume losses were not a concern, but where the S&P 500 found resistance may be. The rally has not been able get above the 20-day EMA, but after the huge rally, the modest is not bad. You can also see that the trading stayed between the 20 and 50-day EMA's.


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

We talked about the rally in the Dow Transportation Index yesterday, as it broke above the triangle formation on Monday. It did pullback sharply yesterday after oil moved up a couple of bucks again, but the Transports stayed above the old resistance area.

The Nasdaq is another story. This leading index is lagging badly and is still trading below the 20 and 50-day EMA's and the 20-day EMA is below the 50-day EMA.


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

The Nasdaq is pretty volatile in comparison to the Dow or S&P 500, so it could snap back quickly. But when one of the leaders is looking bearish we can't get overly complacent.

I found the following data from sentimentrader.com very interesting. This is in regard to the three-day rally on Thursday, Friday, and Monday:

"Each of the past three days has seen more than 72% of all issues on the NYSE close in positive territory.

This is only the third time that's happened since 1940, when coming off of a 50-day low in the S&P 500. To get a few more precedents, let's relax the parameters and only require 3 days of at least a 65% Up Issues Ratio."


                             Chart provided courtesy of www.sentimentrader.com

That is quite a positive sign, but it's interesting that it hasn't happened since 1982 so I don't know how relevant the information is today.

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

Tom Crowley
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