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| Today's Commentary (Short Term Outlook) |
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Fake out or breakout? Stocks were flat to slightly higher yesterday. The Dow fluctuated most of the day but ended the day 21-points higher by the close. Volume has picked up during this busy earnings week. After the close Google posted a good earnings report, but has fallen in after hours trading. The TSP funds were all higher on the day with the C-fund adding 0.08%, the S-fund was up 0.06%, and the I-fund gained 0.38%. Bonds were also higher as the F-fund gained 0.10%. The S&P 500 has now been up six days in a row, 9 of the last 10 days, and 12 of the last 14. The bull has been relentless and the strong earnings pushed the index above the rising wedge formation, but sometimes these wedges give us a quick fake out move before changing course. We'll see. It is tough to bet against this market.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk I have been asked why I am so bearish, and while it may appear that I am, I am actually very bullish as the charts could not be more positive as far as the moving averages go (EMAs). My concern is that stocks have run too far, too fast, and are due for a pullback in the short-term. Anyone who is not currently in stocks should benefit from a little patience rather than chasing these high prices. It is not usually wise to jump after the run that we've witnessed. I have also suggested that some profit taking could be wise here for those in stocks. It's not bearishness per se. I am a market timer and even though the market looks good, I still believe in the "buy low, sell high" axiom. If we can get ourselves a pullback or correction back to the 20 and / or 50-day EMAs (not shown above) I will be the first to consider buying. Remarkably, after the recent rally, the NYSE is overbought, but no where near an extreme reading.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The sentiment indicators are sure flashing warning signs. The put / call ratios are hitting extreme bullish readings, which is normally bearish for stocks in the short to intermediate-term.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The sentimenTrader Smart Money / Dumb Money Confidence Indicator is seeing extreme readings. The 75% Dumb Money reading is well above the 60% warning area, and the smart / dumb money ratio of -0.46 is at a multi-year low (shown as inverse on the chart).  Chart provided courtesy of www.sentimentrader.com Also, our TSP Talk Sentiment Survey came in at 61% bulls, 29% bears, for a 2.10 to 1 bulls to bears ratio. This 2 to 1 ratio gives us the first sell signal since the buy signal we had in late January. So, on Monday the sentiment system will be back in the G-fund. The system is up 17.11% with one more day to go in the S-fund. Thanks for reading. Have great weekend! Tom Crowley |