Fund share prices as of: 5/21/07

Fund -	G Fund	F Fund	C Fund	S Fund	I Fund
	11.93	11.33	16.99	20.56	24.35
$  Change -	+0.01	+0.02	+0.02	+0.20	+0.00
% Change -	+0.08%	+0.18%	+0.12%	+0.98%	+0.00%
	L2040	L2030	L2020	L2010	L Income
	18.31	17.40	16.55	15.20	13.17
$  Change -	+0.05	+0.04	+0.03	+0.02	+0.01
% Change -	+0.27%	+0.23%	+0.18%	+0.13%	+0.08%

Late sell-off a concern?

Once again stocks began the day with a flurry of buying and the S&P 500 reached above the old 2000 record closing high by noon ET.  The actual all-time high for the S&P 500 is about 1552 but the old closing high was 1527.  The low that day in 2000 was 1516 so march 24, 2000 must have been some day for stocks as the day's high was 25 points (nearly 2%) above the closing price, and the day's low was 11 points (almost 1%) below the closing price. 

By the close the S&P did back off closing just modestly higher and still 2 points below that record close.  What gets my attention is how the days action was a microcosm of what we fear as investors; a 5 1/2 hour rally was erased in just 40 minutes.  The problem with our TSP is that we can not be as reactionary as we'd like to be so we have to be a little more defensive.  That is, by the time the late sell-off materialized, we were well past the deadline to be able to step aside if that was the start of any real damage that we may see. 

            
                                   
We saw that 400 point drop in the Dow in February and those who were in the market that day just had to sit by and take it.  So yesterday's reversal to the downside is alarming but so far there has been no damage as the indices did manage to close in positive territory.  Just keep an eye on yesterday's low (1522.71) and also Friday's low (1512.74). 

Looking at the NYSE overbought/oversold indicator we can see that the short-term (blue lines) is basically neutral to slightly overbought, while the intermediate-term has slowly moved from overbought to neutral since late March.  That is a divergence from what the market has been doing.    


                                      Chart provided courtesy of www.decisionpoint.com

Looking at other instances where the market moved higher while the intermediate-term overbought/oversold indicator moved downward, you can see that each occurrence ended with a pullback.  The prior three divergences lasted for approximately four months each and this one has only been three so far.  Could that mean we have another month of upward movement?  My guess is that something will eventually spook the market to bring us into the next pullback.  But who knows if that will start this week, next month or even further down the road?   

Once again I want to stress that I believe any pullback will just bring us a good buying opportunity rather than being the start of anything more sinister.  It would be nice to ride the rally to the top, get out and miss any pullback, then buy back in at the bottom, but it would also be nice if I played shortstop for the Mets.  We can dream, can't we?  

Read Trader Fred's TSP Trader System commentary on the system page.