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Market Comments May 31, 2011 Current TSP Share Prices Twitter

Today's Commentary

Flags Stocks rallied on light volume on Friday.  The week had gotten off to a rough start but stocks moved higher into the holiday weekend.  The Dow gained 39-points on the day. For the TSP, the C-fund was up 0.43% on Friday, the S-fund gained 0.71%, the I-fund jumped 1.42%, and the F-fund (bonds) slipped 0.03%. For more on the weekly and monthly returns, please see our TSP Weekly Wrap-Up. The S&P 500 is in an interesting position.  We have a large bull flag that found support at the open gap near 1313 last week, but Wednesday through Friday's action has formed a shorter term bear flag.  We'll have to see which flag breaks first, and looking at the overnight futures, it looks like we could have a strong open on Tuesday morning.                                      Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk A positive close today would likely move the S&P above the 20-day EMA again, and produce a breakout in the bull flag.  That would be a good short term sign that the index could look to test the May 1 high in the coming days / weeks. Looking out a little further I am getting more concerned that we could have another correction coming.  This weekly chart of the S&P 500 shows that we are in a large rising wedge pattern, and rising wedges tend to break to the downside, eventually.  Since we are getting very close to the apex of the wedge, it leads me to believe that we have weeks, rather than months, before this could manifest.                          Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk As I have been saying, I have remained a lot more bullish than some of our premium services primarily because of the excessive bearishness we have seen the various sentiment surveys, ours and others.  But if the S&P can push to new highs in the coming days / weeks, we will almost certainly be seeing more bullishness in the surveys, which would then put me more into profit taking mode.  As I mentioned, the futures are up sharply as I write this Monday night, and a large part of that is due to the overnight weakness in the dollar after consideration has been made to bail out Greece.                                                  If you recall, the debt woes in Europe were responsible for the recent rally in the dollar, but you can see that after Friday's lower low, the dollar's chart may be rolling over again.                                                  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk This, of course, would likely be bullish for the stock market in the short-run. Tomorrow is the 1st trading day in June and as you can see in the seasonality chart, the month has some bright spots... But overall it is one of the weaker months historically (56 years from 1950-2005).                                          Charts provided courtesy of www.sentimentrader.com In the last 6 years (since 2005) the best month the C-fund had in June was +0.24% in 2009. Our TSP Talk Sentiment Survey came in at 45% bulls, 39% bears, for a 1.15 ratio. That is a neutral reading so the system's allocation remains 100% S-Fund for this week. The system is currently up 9.35% in 2011, through Friday's close. Thanks for reading!  We'll see you back here tomorrow.   Click here to discuss today's Market Commentary Tom Crowley

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