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Today's Comments (Short Term Outlook)
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Filled - Now what? Stocks rallied yesterday as the major indices and TSP stock funds all added just over a half of 1% on the day. Bonds also added a small gain. The S&P 500 continued its rebound from the Friday - Monday sell-off, but again volume was very light and the rally may be tough to trust. The PMO indicator is still below its 10-day EMA which is still a short to intermediate-term sell signal.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Yesterday we talked about the large gap left open on the Nasdaq after Monday's weak opening. The 8/18 chart of the Nasdaq (below, left) was what we were looking at going into yesterday, and we said that it wouldn't surprise us if we saw the gap get filled quickly, before any downside action continued. Well, the gap was filled yesterday (below, right) and while that doesn't tell us what will happen next, it does tell us that the gap is in fact filled, that is behind us, and we don't have to worry about that anymore. If the Nasdaq had dropped 1% yesterday rather than rallied 1%, I would have said that we still have to be ready for an imminent rally to fill that gap, but now that it is done, their are no more obligations to fill above.
On Tuesday we discussed the -500 area being an area of possible support for the NYSE overbought/oversold indicator (ob/os). What I didn't say - mostly because I hadn't noticed - was that there is a pretty prevalent rising trend of higher lows on the ob/os indicator. We have now seen a bounce off of that rising support.  Charts provided courtesy of www.decisionpoint.com, analysis by TSP Talk I like when the indicators give us some kind of reason for the market movement, and the rally off of that support line, plus the fact that the overhead gaps needed filled, gives us some kind of explanation for the current rebound. But now that we have had the reaction - the ob/os is basically neutral and the gaps being filled - the market is going to have to give us another clue as to which way it wants to go next. The pullback could very well resume, and that is what I am hoping for so I can buy at a lower price, but it seems so many folks are expecting a stronger pullback, and the market seems to enjoy fooling the most people it can. In other words, nothing would surprise me. I need more clues. With this week also being an options expiration week, we have another reason to expect the action to be unpredictable. That's all I have for today. Thanks for reading! See you back here tomorrow! |
