Market Comments May 20, 2009  Current TSP Share Prices

Today's Comments (Short Term Outlook)                            Printer  friendly

Half empty, or half full Stocks closed basically flat yesterday, after a tight trading range day.  It is a pre-holiday week of trading and we can probably expect the unexpected. I have been adamant the last several weeks about the market getting ready to see an end to the current rally.  So, let's take a look from the another angle... At decisionpoint.com, they drew my attention to what appears to be the start of an inverse head and shoulders pattern on the S&P 500, which would be bullish if it breaks to the upside.  It would be bullish, but if a full right shoulder (RS) formed, the S&P could actually move down to 750-800 and still be in the H&S pattern - or it could breakout from neckline soon, and while it wouldn't be a well defined right shoulder, it would still be an H&S breakout.  So that is something for us to keep an eye on, particularly since I have been viewing the pullback scenario with blinders on.                  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The put / call ratios are still overwhelmingly showing us that the dumb money is overly bullish, while the smart money continues to get more and more bearish.  I look at sentiment as a major indicator so this is one that makes it tough for me to look for more upside.  Anything is possible, but I sure wish this indicator would reverse before so I would feel better about becoming bullish - whenever that will be.                   Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The dollar is not looking very good at all.  This is not a deal breaker for stocks, however.  In fact, stocks can do rather well when the dollar drops, for the same reason you would see commodity prices go up when the dollar falls.                  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk A weak dollar makes what is sold in dollars, more affordable and thus more attractive to buy.  That would be similar to Americans wanting to travel to Europe when the euro is weak versus the dollar, because your dollar would buy more in Europe so travelling there is less expensive and thus more attractive.  If stocks were cheaper to buy in dollars, the price also becomes more attractive to foreign investors.  When buyers step in - prices go higher.  I hope this makes some sense. Of course the weak dollar is also very good for international stocks (assuming they are going up to begin with).  Next Monday is Memorial Day and there will be no trading.  Here is the seasonality chart showing the historical performance before and after the holiday.                             Chart provided courtesy of www.sentimentrader.com Today would be day -3, Friday is -1, and Tuesday of next week is +1.  That's all for today.  Thanks for reading!  See you back here tomorrow.