Market Comments June 4, 2009  Current TSP Share Prices

Today's Comments (Short Term Outlook)                            Printer  friendly

Resistance in stocks and bond yields The market took a pause yesterday after last week's rally, but the bulls put on a good show late in the day to keep stocks from closing near their lows. With about a half hour to go in the trading day day, the Dow was down about 150-points but after the late surge, it closed down just 65.      Still, the January high on the S&P 500 and the 200-day moving average are proving to act as resistance, as we suspected, but for how long?                   Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The MACD indicator is now giving us a smaller divergence within the larger one, but are those looking for a pullback just grasping at straws?  Perhaps, but the MACD is a pretty good indicator  during trending markets, which we have now, and the fact that we have a short term higher high on the S&P with a lower MACD reading, and the longer term rally is being met with a declining MACD, should be concerning for the bulls.  Even if we don't see new lows in the market, this could be an indication that this rally needs a break. The Investor's Intelligence Sentiment Survey hit a bulls to bears ratio of 1.68 to one, this week.  If we are still in the bear market, this reading could be a little too high, as you can see below.                  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk If however, we are starting a new longer term bull market, a 1.68 to 1 ratio is nothing special.  You can see above that this is the most bullish ratio since late 2007. Bond yields have risen dramatically this year as the 10-year T-note has gone from about 2.0% in late December, to 3.7%, closing at 3.55% yesterday.  Have they come too far too fast?  They seem to have hit some technical resistance even though the fundamental picture may be indicating higher yields might be inevitable.                 Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk If yields do pull back, bond prices and the F-fund would be the beneficiary.  Even if inflation becomes out of control in the future, and the dollar continues lower, there could still be playable rallies in the bond market.  As we discussed last week, bond sentiment is very bearish right now, which from a contrarian perspective, could be bullish for bonds in the short-term. That's all for today.  Thanks for reading!   See you back here tomorrow.