For the TSP, the C-fund gained 0.39% on Friday, the S-fund and I-funds were up 0.42%, and the F-fund (bonds) added 0.05%.  For more on the weekly and monthly returns, please see our TSP Weekly Wrap-Up.

The jobs report was mixed, and we have actually seen the market sell-off on this kind of report before;  That is, a higher than expected number of jobs created (244,000 vs. 185,000 estimated) and an increase in the unemployment rate (9.0% vs. 8.8% estimated.)

I know I am sounding like a broken record lately, but until this inverted head and shoulders pattern completes or breaks down, this is what I am focusing on as a guiding road map.

                                       
The S&P 500 is now testing the neckline and while it is holding so far, I would have felt a lot better coming into this week if the rally held on Friday.  I am still concerned with the open gap near 1315 getting filled. 
 
                         
                        Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

We will certainly want to see stocks open and stay higher today to confirm the neckline holding.  Any break down in the neckline in the short-term will probably lead to seeing that gap get filled.

The key may be the dollar.  The rumor of Greece possibly leaving the EU (not being part of the euro) ignited a rally in the dollar on Thursday and it carried over into Friday, whether it was in spite of the jobs report, or because of it.  Since the jobs report was mixed, I'm not sure what effect it had on the dollar.  

                         
                        Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The dollar is now testing the upper end of its descending trading channel and could either break out and break the down trend, or it could find resistance and head back down.  Obviously a pull back in the dollar would be more bullish for the stock market.

Bond yields have been fooling me left and right.  When the yield on the 10-year T-Note pulled back to the 200-day EMA, I thought we'd see a bounce in yields, particularly because the dollar looked like it was finding support near 73, and I figured a rebound in the dollar would help push yields up. 
                         
                        Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

Instead, yields continued to move lower and is now at a very important level.  Before I go on let me remind anyone who may be new here that when bond yields go down, bond prices and the F-fund go up.  When bond yields go up, bond prices and the F-fund go down.  So this drop in yields recently has helped keep the F-fund up.

Bonds are used as a safe haven when stocks are falling, so that could be the reason why we saw bonds go up while the dollar was rallying last week.  Normally a rising dollar will lift bond yields and cause bond prices and the F-fund to fall.  That did not happen on Thursday and Friday.

A longer term chart shows just how potentially bearish the 10-year T-Note yield is. If that support level near 3.1% does not hold, there is not a heck of a lot of support until it gets to under 2.5%.  Notice that the 200-day EMA is acting as resistance in this long term yield bear market (bull market in bonds / F-fund.)
                        
                        Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

This would be bullish for bonds and the F-fund, but from a fundemental outlook, this seems strange.  If the economy is improving as we have been hearing, then bond yields would be going up, not down.  This may be telling us that this economic recovery may not be in as good of shape as we are being led to believe.

The recent TSP Talk Sentiment Survey gave another buy after the 0.84 to 1 bulls (38%) to bears (45%) ratio.  That buy signal keeps the system's allocation at 100% S-fund for this week.  The system is currently up 8.87% in 2011, through Friday's close.

Administrative Note:  Today only (Monday, May 9) we are giving free access to these Premium Services: RevShark, Trader Fred, and Scribbler.

And the EbbChart System will be free all this week!


Thanks for reading!  We'll see you back here tomorrow!