Can a tired market give us one more push?

Not much of a rebound yesterday after Wednesday's 280-point sell-off, but despite the 42-point loss in the Dow, we did see an intraday reversal off of the lows, and most of the broader indices closed near the break-even mark.
 
                                   
For the TSP, the C-fund lost 0.12% yesterday, the S-fund slipped 0.02%, the I-fund lost 0.21%, and the F-fund (bonds) lost 0.30%.

After Wednesday's poor ADP employment report, and with this morning's important jobs report looming, we didn't really expect much excitement from investors yesterday.  I was surprised to see the intraday rally after noon, but fearful sellers sold again during the last hour of trading.

The chart of the S&P 500 is the market's worst enemy right now as the indicators are not too bad, but the downtrend is quite apparent.  The index is now down below the 20 and 50-day EMA's after a temporary move above them.  The old gap from back in April, officially at 1312.70, was broken yesterday intraday, but I find some interest in the fact that the S&P 500 closed at 1312.94, just above that level. 

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

That slightly positive development is kind of a stretch, and here's another small "bright side" - The market leaders, Dow Transportation Index and the Nasdaq, both closed higher yesterday with the Transports adding about 0.5%. 

The TSP Talk Sentiment Survey came in at 31% bulls, 56% bears, for a bulls to bears ratio of 0.55 to 1. That is a fresh buy signal reading so the system's allocation remains 100% S-Fund for next week.  The system is up 7.61% for 2011.

I feel this market has grown tired after a two year, 100% return rally, and it may be time for a correction.  But the recent weakness has brought sentiment to a level of bearishness that has the ability to keep the market afloat a while longer and I would not be surprised to see a push back up to the May 1 highs in the coming weeks.  At that point however, I will be happy to lock in some gains as the country heads toward the debt ceiling battle in late summer.  We have a real economic mess on our hands and if we don't start hearing the term QE3 being thrown around soon, I think investors will get very defensive this summer.

Greenspan on the debt: