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Neckline test Stock were down yesterday after a couple of weaker than expected economic reports - the ISM report, and the ADP weekly employment report.  The Dow lost 84-points.                                     For the TSP, the C-fund lost 0.67% yesterday, the S-fund fell 1.06%, the I-fund dropped 1.43% and the F-fund (bonds) added 0.11%.  The weaker than expected weekly employment report (ADP) coming before Friday's important monthly employment seemed to have spooked investors as we know the monthly report can be a big market mover.  The S&P 500 has moved down to test the neckline of the inverted head and shoulder pattern, and also the 20-day EMA.                                                   Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The question now is whether the S&P 500 needs to fill that open gap, or will the neckline hold, as we have been illustrating in our inverted H&S example for a while now?                                        The Nasdaq is in the same situation and it has a huge gap that looks ripe for the filling.                                                    Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk If it were not for those open gaps I would be aggressively buying this dip right now, but because of the gap I made only a partial buy yesterday leaving some money in the G-fund in case we do fill those gaps.  I will also buy again if the S&P can bounce off of the neckline.  The dollar has been falling almost relentlessly for some time now, but it has stabilized a little bit here in the 73 area.  It looks like it may want hold here and possibly make a run to the top of the descending trading range.  It is difficult to find anyone who is not expecting the dollar to fall off a cliff.                                                    Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk How bearish are folks on the dollar?  Well public opinion is down to 15% bullish on the dollar and as we know, when these type of sentiment surveys hit extreme readings, it could be time for a temporary reversal.                                                                               Chart provided courtesy of www.sentimentrader.com The 15% reading has only been lower twice in the last 12 years.  The bear market in the dollar continued in both instances, but both overly bearish readings resulting in temporary rebounds. If you recall, the other day we said a rebound in the dollar would likely take bond yields higher, which would pull bond prices and the F-fund down, and stocks may have a more difficult time moving higher.  It doesn't mean that stocks WILL go down, but it won't be as easy for them as when the dollar if falling. Thanks for reading!  We'll see you back here tomorrow.   Click here to discuss today's Market Commentary Tom Crowley

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