Stocks rally again
Stocks rallied again on Wednesday after good earnings reports from
Intel, Morgan Stanley and CSX. We have seen the market rally off
of Intel reports before, but now comes the test.
We talked about it yesterday so I will leave Wednesday's commentary
below. The gist is that the market tends to peak and pullback,
after a good report from Intel. We'll have to see if yesterday's
100+ point gain in the Dow is in fact a temporary peak.
The TSP stock funds all jumped on board the bull train as the C-fund added
1.12%, the S-fund
led the way with a gain of 1.77%, and the I-fund was up 0.99%. The F-fund
slipped
0.14%.
Earnings reports will continue to spill out so we will just have to
watch how the market reacts.
Thanks for reading. We'll see you back here tomorrow.
4/14/10
The Intel Effect
Stocks
closed
slightly higher yesterday but trading was mostly tentative in front of Intel's
earnings report. The Dow gained 13-points while the S&P was up
less than 1.
After the bell, Intel did announce their earnings for Q1 and the after
hours trading is applauding the report as the stock was up 4%. But
as we'll talk about in a minute, that may portend some trouble for
stocks.
The
S&P 500 was basically flat, but it did fight off some early losses
so the dip buyers are still lurking. The rising wedge, which is a
formation that generally breaks down (but not always) is getting
squeezed pretty good so we should see a resolution quite soon.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
We have been
talking about bond yields since that 10-yer T-note rate hit 4%
earlier in the month, and while we think that bond
yields will have to move higher in the long-term, we have been expecting
a short-term pullback from the 4% level to at least the obvious target
of about 3.68%, where there is an open gap that needs filled, and a
rising support line.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP
Talk
The 200-day EMA is sitting at about 3.58%, and that could also be
tested, but if you are in the F-fund you might take some profits if
there is a bounce off of that support / open gap (assuming it gets
there).
The "experts" are split on this. This chart from the Wall Street
Journal shows that forecasts for the 10-year yield through the end of
2010 range from 3% all the way up to 5.50%. That's quite a range
and depending on who you believe, you will want to avoid the F-fund if
you believe Morgan Stanley's 5.5% prediction, or use the F-fund instead
of the G-fund if you believe Goldman Sachs who is near the lower end of
the range. (Bond prices and the F-fund go up when yields go down).
Source:
www.online.wsj.com
It makes it tough for us common folk to make a prediction. If they
don't know, how the heck are we supposed to figure it out? The
medium forecast is 4.2% so if that turns out to be close to accurate,
that would be bearish for bonds and the F-fund for the rest of 2010.
As I mentioned, Intel
posted a solid earnings report and the stock moved higher in after hours
trading. It has been fairly common to see the market peak out, at
least in the short term, after a positive or negative report.
Of course sentimenTrader.com is all over this trend. When the QQQQ
(the Nasdaq 100 index) is within 2% of a 1-year high and Intel
reports...
Chart provided courtesy of www.sentimentrader.com
Only two of the last 15 occurrences saw the Nasdaq 100 higher two weeks
later.
As far as the S&P 500 goes, sentimenTrader.com says:
"Moving to
the S&P 500, there have been 9 times over the past 13 years (the
furthest back that I have accurate data for Intel earnings reports) when
that company reported and the Bull Ratio in the Investor's Intelligence
survey was above 70% [it is currently 72%]. Two weeks later, the S&P
was lower every time, by an average of -2.0%.
"The S&P's
maximum gain during those two-week trades averaged only +0.7%. Its
average worst loss, however, was -3.4%. It has been really tough
for the S&P to march higher after that bellwether reports and sentiment
is already very optimistic."
So the news is positive, but the outlook says we could see a "sell the
news" reaction.
Thanks for reading. We'll see you back here tomorrow.
Tom Crowley
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