Market Comments May 5, 2009  Current TSP Share Prices

Today's Comments (Short Term Outlook)                            Printer  friendly

Punishing the nonbelievers Stocks blasted off yet again yesterday, as the S&P 500 broke through the 900-level like a hot knife through butter.  The trend remains up, and the market continues to punish the nonbelievers.        The S&P 500 is back near the top of its recent ascending trading channel.  So much for my prediction that last week would be the high.  It now appears to be on a collision course with the 200-day moving average, which is just above 950, and coincides with the high made during the Santa Claus rally.  That could act as resistance, but that's still nearly 5% away.                   Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The S&P 500 is now up for the year and the indicators have been less than helpful over the last several weeks.  The market is telling us, up, up, up, but can we ignore the MACD (above) which is showing us a very clear divergence? This divergence should be telling us that this rally can not last, but last it has (so far). Below we have the Smart Money / Dumb Money Confidence indicator from sentimentrader.com.  Either the dumb money has figured things out and the smart money has lost it, or we have another indication that the rally is getting old.                            Chart provided courtesy of www.sentimentrader.com When the smart money moves below 40, and the dumb money moves above 60, this indicator gives a sell signal.  The smart money hasn't seen a reading this low since the middle of 2007, just before the bull market peak.  The dumb money has been over 60 a few times before this rally in the last couple of years, and each time it marked a very strong selling opportunity. I am also seeing a few folks on the message board capitulating (giving up).  They have been on the sidelines but the pain of missing the rally was becoming too much to take so they threw in the towel and bought into the stock funds over the last couple of days.  Whether it is a good move or not remains to be seen, but like a capitulation at a market bottom tends to be a great buying opportunity... That's all for today.  Thanks for reading!  We'll see you back here tomorrow.