Fed stays put
We saw the usual post-Fed announcement action
as stocks were relatively flat most of the day
before the announcement, then they bounced up and
down like a hot potato before closing basically flat
again.
Two observations: The market was able to hang
onto Wednesday's big gains, which was a positive.
But they were unable to add to those gains after a
some pretty decent news from the Fed. Although
there was no change in rates, they did
remove the term "elevated" in describing inflation.
One reason for the market not advancing much after
the announcement was because the shortest-term
indicators were very stretched to the overbought
side. A little pullback or consolidation this
morning could remove that.
We have some interesting positives and negatives
that face the market now. I'll throw them at
you in bullet form:
The positives:
- The 1st week in July is historically strong,
coinciding with the positive holiday bias.
- The TSP Trader and EbbChart Systems are on a buy
signal
- The bull market trend is still intact, even after
the recent pullback
- The overbought/oversold indicator (not the short
intraday one) is still oversold
- The AAII Sentiment Survey is still close to overly
bearish, which is bullish for stocks
- The Nasdaq has done better than the overall market
lately, and the rest of the market tends to follow
the Nasdaq
The negatives:
- The rally stalled after good news
- The intraday indicators are overbought
- The TSP Talk Sentiment Survey System, our system
with the best return, is giving us a sell signal for
next week
- Big gains made during the 2nd quarter may be
pocketed by money managers before earnings warnings
season begins and the start of their vacations
- The lower high and lower low on the S&P is a sign
of potential technical problems. The S&P needs
to make a new high before turning south again
The S&P made it back into the middle of this recent
trading range.
I believe the direction of the next 5% or more move
will be decided by which end of this range is broken
first.
Chart provided courtesy of
www.decisionpoint.com
SentimenTrader.com tells us that there have been 16
times since the bear market low in March 2003 that
the S&P 500 closed in positive territory on the day
of a Fed rate decision. Three trading days
later, the S&P showed a positive return only 5 times
with an overall average return of -0.2%. But
guess what? That late selling yesterday moved
the S&P 63 cents into the red. Not a positive
day. Just a technicality?
Trader Fred's
TSP
Trader System is now on a buy signal. Read more from Fred on the
system
page.
The EbbChart System
is in I-fund for today and Monday. Read more on the
ebbchart page.
The
TSP Talk Sentiment Survey System, which is up
over 13% this year, has moved to a sell signal for
next week after the 2.65 to 1 bulls to bears ratio.
Administrative Note: One of the things
that has always been missing from TSP Talk has been
good information about the Savings Plan itself.
We have focused mainly on managing the funds.
Well, we have joined forces with
FedSmith.com,
who will now share their
TSP
Corner articles with us. Check in with TSP
Corner each week to get the latest TSP news.
That's all
for today.
I am currently 100%
S fund but I do have my guard up and I'm not afraid to step aside again
if the market can not hold on to gains. This
sub-prime mess could continue to be a thorn in the
side of equities for a while. Have
a great weekend!
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