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Update 9:49 AM ET: Humble pie After writing the wildly bullish commentary below last night about the charts looking bullish and that the charts will give us the clues when things change, the market throws us a curve.  This morning's action, should it hold, is everything I would have feared for the market.  The early sharp declines in the indices after this morning's news that Standard & Poor's cuts U.S. outlook to negative on fiscal worry downgrade have taken out the 20- and 50-day EMA's and we have a lower low.                                                 Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk How this plays out today, I'm not sure, but the charts no longer look as bullish as I talked about below.  I'm eating some humble pie for breakfast.                                   The charts are bullish Stocks rallied on Friday completing a week that saw a successful test of the 50-day moving average on many indices.  The Dow gained 57-points on Friday, but lost 38-points for the week.                                   For the TSP, the C-fund gained 0.39% on Friday, the S-fund was up 0.83%, the I-fund slipped 0.18%, and the F-fund (bonds) was up 0.38%. For more on the weekly and monthly returns, please see our TSP Weekly Wrap-Up. The S&P 500 pushed below the 50-day EMA last week, but never did close below it.  Thursday's reversal day and Friday's follow-through to the upside moved the index back above the 20-day EMA.  A chart that trades above the 20-day, 50-day, and 200-day EMAs is a bullish chart.  Should the index move down below these averages, then we have a different story on our hands.                                                   Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk I have been asked about my views on the fundamental picture of the economy and while I do have some opinions, I have always been a believer in the chart and not the story.  That is, regardless of the fundamentals, the market is either going to move up, down, or sideways, and that is what I react to, rather then on my less than qualified understanding of the economic fundamentals.  For the record, I don't like what I am seeing out there as far as the economic picture goes, but I spent a lot of time in the G-fund in the past, waiting for the market to do what I thought it should do, rather than doing what the market was telling me to do.  We were talking about the sub-prime mortgage situation on our message board two years before the financial crisis translated into market losses a few years ago, and I missed a lot of those 2005-2007 gains.  Now my experience tells me that, if the charts look good, don't fight it.  Eventually the charts give us the clues.  This chart of the Dow Transportation Index took some hits over the last several weeks, but it never completely broke down, and here it is now trading above the 20-day EMA.  Being the market leader, this is a good sign for the S&P 500.  This is a clue.                                                  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The Nasdaq is also trying to tell us something good may be happening.  While I am a little concerned that a bear flag is developing, the fact that the 50-day EMA held, and that it is trading above the 20-day EMA again, suggests that we should be buying dips rather than selling rallies.                                                   Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Should the Nasdaq head down this week, and land below the 20 and 50-day EMA's, then we have to be nimble and adjust our outlooks. The other leader, the Russell 2000 (small caps) is also painting a bullish picture as of today.  It is also back above the 20-day EMA after finding support at the 50-day EMA.  What's not to like in the short-term?                                                   Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The TSP Talk Sentiment Survey gave another buy signal so the system's allocation will remain 100% S-fund for this week.  That's more confirmation to me that the market should have some life left in it - at least in the short-term. Thanks for reading!  We'll see you back here tomorrow.   Click here to discuss today's Market Commentary Tom Crowley

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