Today's Commentary
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Testing the
upper range
Another nice rally on Wall Street yesterday, after the one day pause on
Wednesday. The Dow jumped 152.5 points; Its second triple digit gain
of the week despite being less than two-weeks from a possible U.S. default.
The market seems to always keep us guessing.
For the TSP, the C-fund
gained 1.36% yesterday, the S-fund
was up 1.00%, the I-fund jumped 1.72%, and the F-fund (bonds) was
down 0.20%.
As you probably know, I have tried to keep my head out of the headlines and
let the charts guide the way. If we based our investment and trading
decisions on the news and economic data, we would probably all be sitting in
a bunker somewhere right now. But the charts have been telling a more positive
story and the strong earnings coming out have justified the recent bullish
chart formations.
The S&P 500 is reaching toward new highs, but it is at the upper end of
its 6-7 month trading range. Volume was strong on yesterday's rally,
and the PMO is turning up and remains on a buy. I don't have too many
reasons to believe the market is in any trouble, although there are a few, and of
course the headlines still have the ability to shake things up in the
short-term.
Chart provided courtesy of
www.decisionpoint.com, analysis by TSP Talk
I like the setup for an eventual breakout but there are a couple of
indicators that are showing some negative signs for the short-term. Also, I usually don't
mention this since we have paying subscribers, but every one of out
premium services is in a
defensive allocation right now. That rare and it seems every time attempt go against
that flow, I pay the price.
The
TSP Talk Sentiment Survey came in at 54% bulls, 34% bears, for a bulls to bears ratio of 1.59 to 1. That is a neutral reading so the system's allocation remains 100% S-Fund
for next week. The system is up 9.68% for 2011 through Thursday's close.
This chart is a bit old but it does represent 56-years worth of data.
You can see that August is a coin flip when it comes to gains or losses, and
that makes it the 3rd worst month historically.
Chart provided courtesy of
www.sentimentrader.com
And the first
half of the month is worse than the second half, although the end of the
month isn't great either. (This chart data is more current.)
Chart provided courtesy of
www.sentimentrader.com
I am on the sidelines starting today but I do have an IFT left in July and I won't
be shy about jumping back in stocks should we get a little pullback. Of
course being invested heading into the August 2nd debt ceiling deadline is
certainly a gamble and seeing the historical weakness of the first week of
August makes me leery. But I think seasonality can be thrown out the
window right now as the market is at the mercy of the debt ceiling
negotiations, the European bailouts, and earnings. It's tough to call,
but when in a bull market, expect the end result to be bullish. To me
that means buy the dips.
Thanks for reading! Have a great weekend!
Tom Crowley
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