TSP Talk - Thrift Savings Plan Strategies

Market Comments

April 13 2010

Current TSP Share Prices

Today's Commentary (Short Term Outlook)

11,000

Stocks were slightly higher yesterday as the Dow gained 9-points on the day to close over the 11,000 level for the first time in almost two years. I'm a little worried that this level was a little forced on us, but the freight train's momentum has been tough to stop.

For the TSP, the C-fund added 0.18%, the S-fund gained 0.24%, and the I-fund led the way with a gain of 090% after a sell off in the dollar. The F-fund also had a nice day gaining 0.30%.

After the close yesterday, Alcoa (AA) kicked off earnings season reporting a slightly better than expected earnings report (0.10 vs. 0.09 est.) but the stock traded down about 0.5% in after hours trading. Sell the news?

The S&P 500 traded in a tight trading range and while the bears could not take it down, it did have a tough time moving higher as it is now 115.64 points above the 200-day EMA, and this could keep the upside limited as it remains stretched to the upside.


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

As we mentioned in yesterday's commentary, the dollar was losing ground on the news of Greece's bailout proposal. It broke below the rising trend line but found at least some temporary support at the 50-day EMA as it rebounded after the initial negative reaction.

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

The 50-day EMA could very well be enough support to trigger a new rally, but that old support line could now act as resistance. But if you notice, the PMO indicator is giving a new sell signal.

We have seen some mixed results in various sentiment surveys, and our survey is currently in neutral territory, but there is something interesting going on with options traders.

SentimenTrader.com tracks an "Options Speculation Index" and it is now hitting levels not seen in many years.
EXPLANATION:

"The Options Speculation Index takes data from all the U.S. options exchanges and looks at opening transactions.

We total the number of transactions with a bullish bias (call buying and put selling) and also the number of those with a bearish bias (put buying and call selling).

The Index is a ratio of the total bullish transactions to the total bearish transactions."


                               Chart provided courtesy of www.sentimentrader.com

You can see that the current 1.42 ratio is hitting "bubble territory". Remember the "dot com" days of 2000, just before technology stocks fell off of the table? The Nasdaq lost about 80% of its value over the next three years. That's how bad the current put/call ratios are getting. Not quite as bad, but still quite severe.

As I mentioned yesterday, the Dow hit the long much anticipated 11,000 level, and earnings season is getting started. There are many reasons to believe we could see some sort of pullback or correction, but stepping in front of an oncoming freight train is not usually the best idea. Momentum is on stocks' side but you never know what is lurking around the next bend in the tracks.

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

Tom Crowley

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