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How much more? After a one-day bounce on Thursday, the market resumed its downward action on Friday as investors did not seem to want any part of holding stocks over the weekend. The Dow lost 172-points, closing near the lows of the day. For the TSP, the C-fund lost 1.40% on Friday, the S-fund fell 1.58%, the I-fund dropped 1.55%, and the F-fund (bonds) added 0.08%. For more on the weekly and monthly returns, please see our TSP Weekly Wrap-Up. Last week made it six weeks in a row of losses for the S&P 500. We saw some breakdowns in the chart as support levels failed, and approached the important 200-day EMA, which is currently 1262. The 200-day simple moving average is near 1253 if you follow that one.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk I am keeping an eye on the inverted head and shoulders pattern, which is currently in the process of testing the middle of the head...  We saw a similar formation last summer when the test of the head held and the S&P 500 started a strong rally.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The TSP Talk Sentiment Survey came in at 41% bulls, 48% bears, for a bulls to bears ratio of 0.85 to 1. That is a buy signal so the system's allocation remains 100% S-Fund for this week. It's certainly no surprise that sentiment is overly bearish after a 6-week decline. That is usually a sign of at least a relief rally, but so far - nothing. We may need to see some capitulation on high volume before this turns around, but based on sentiment, it seems like we're close. The SentimenTrader.com Smart Money / Dumb Money Confidence Indicator, which is a compilation indicator of many various sentiment indicators, is hitting the buy signal level. We get a buy signal from this indicator when the dumb money drops below 40 while the smart money moves above 60.  Chart provided courtesy of www.sentimentrader.com In the past we have seen these numbers get more extreme than this before a reversal, but the smart money reading is the highest in over a year while the dumb money's 38 is the lowest reading since the bottom of last summer's correction. What has been interesting about this recent decline, is that we have not seen much of a spike in the VIX (volatility index, or "fear gauge".)  This is an unusual situation and of course our friends at SentimenTrader.com were all over this by looking at previous instances when the S&P 500 hit a one month low while the VIX saw no increase...  Chart provided courtesy of www.sentimentrader.com There weren't many instances going back to 1986, but when it happened it didn't seem to be a indication of complacency, but rather it actually turned out to be rather bullish. I can't explain it, but being positive one month later 88% of the time is quite impressive. Administrative Note: Today Only... Intrepid Timer is giving free access to his very popular premium service report. You can access today's report by clicking here or by going to http://www.tsptalk.com/free/intrepid_061311.html. Thanks for reading! We'll see you back here tomorrow.. |
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