For the TSP, the C-fund was up 0.47% on Friday, the S-fund gained 1.29%, and the I fund made 0.10%, while the F-fund gave up 0.42%. For more on the weekly and monthly returns, please see our TSP Weekly Wrap-up. 
  
The S&P 500 is flirting with that descending trend line and is now 8-points away from the 200-day EMA.  This will be a big test for the market.  Both of our markets leaders, the Dow Transportation Index and the Nasdaq, have moved above their 200-day EMA's so the bulls will be looking for the lagging S&P to follow.  We will want to see the volume pick up substantially if we do get a breakout, as the volume on Thursday and Friday was very low, particularly on Friday.

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

We have not seen 3 consecutive positive days in the S&P 500 in over two months (April 15th) so with Thursday and Friday closing in positive territory, today will also be a psychological test for the market. 

The support story has been pretty good so far as the February low has been successfully tested twice now, and the S&P has crawled its way back above the May 6th "shock day" low.  OK, that will be the last time I mention the shock day.  I think I have milked it for all it is worth.  It worked pretty well, but I'll move on.

The market is certainly not out of the water yet, but we are seeing several indicators that are looking promising for the intermediate-term.  We went over a few of them on Friday with positive readings from the MACD, the sentiment surveys, the Rydex Cash Flow Ratios, and today I'll show you some Breath and Volume Oscillators that are telling the same story - that is, that the market has pulled back nearly 15% from the top and may be ready for an oversold bounce.
                     
                     Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The dollar has been very strong in 2010 but it is now dealing with some long-term resistance after its recent near parabolic move higher. 
 

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

As you may know, a strong dollar puts some pressure on stocks and commodities, so a pullback in the dollar would help the stock market with the oversold bounce that we believe is due.

I am not a real big fan of the market and economy looking out more than a few months, but I still want to try to take advantage of a rally if we can get it.  It would be ideal to see the S&P 500 move to the 1150 area, which was the high in January of this year.  I have noticed a possible head & shoulders pattern on the chart but I thought it was too early to talk about, but I see that DecisionPoint.com talked about it on Friday so I might as well go for it.  Of course they also said its too early to worry about, but it is worth keeping an eye on.


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

Should it play out perfectly, which it probably won't, we could see a move to the 1150 area before things head down again.  That was the peak of the left shoulder (LS).  A head & shoulders pattern is usually a bearish pattern, but the right shoulder (RS) may have to be completed first.  That would give us a rally over the next couple of weeks.  The bad news is, if the head & shoulders does form, and the neckline eventually breaks, the downside target would be in the neighborhood of 880.  But we'll talk about that if and when this H&S starts taking better shape.

The TSP Talk Sentiment Survey came in at 49% bulls, 40% bears for a 1.23 to 1 bulls to bears ratio.  That keeps the system on a buy signal for this week.

So, depending on your investment timeframe, how active or inactive your approach is, etc., your plan may be a lot different than someone else's.  The fundamentals for the long-term are shaky at best.  We see it playing out across the globe now with debt and credit problems.  But the shorter-terms offer occasional opportunities, and whether you "play" them or not depends on that plan.  


Happy Flag Day!



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

Tom Crowley