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Coolhand's Market Analysis

The Bull Hits Fresh Highs

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Last week, I said that I thought the market was probably close to a bottom. I had my eye on Weird Wolly Wednesday as the day we might confirm a bottom and thought we'd get some weakness during a volatile trading day. We got neither after the market dipped on Tuesday, but roared to life on Wednesday with a bias higher the rest of the week.

It's easy to miss the big moves in this market with all of the chopping up and down for weeks. And now, in a matter of just a few days, the market is sitting at fresh all-time highs as far as our TSP funds are concerned.

MARKETTIMERS ALLOCATION-s-p-500-png

An upside breakout in the S&P 500 was achieved on Friday. Momentum is quite positive, but volume has only been average. Not that it's a big issue, but it makes me question the longevity of the move.

MARKETTIMERS ALLOCATION-dwcpf-png

We have a breakout on the DWCPF as well.

The EFA is also sitting at a fresh high.

My intermediate term system, which only recently flipped negative, is positive again. Cumulative breadth is soaring and at all-time highs. Liquidity is deep into expansion territory and momentum is positive.

What's not to like?

Actually, now is the time to start thinking about getting defensive even if the upside move is not finished. I note that our TSP Talk sentiment survey came in a bit too bullish, which is bearish. And the market often reverses on very bullish technicals. However, NAAIM remains steadfastly bullish. My thought here is that this group has been bullish for months, but the market does not move relentlessly higher on their sentiment. What it has meant is that the bull market is still a bull and that "up" is the path of least resistance. But that doesn't preclude a sell-off as we've seen in the past.

I have been wary of a Summer sell-off, but have let the indicators tell me how near we may be to one. It it still hard to say given that there is little to indicate a problem other than everything looking so rosy. That by itself can be a problem.

The chances of a pullback is rising again. I have not made a move in my TSP account in some time now, but I am making one on Monday to 100% G fund simply because things look "too" good. But it will not surprise me if a top does not come right away. Having said that, I think we may have already seen the bulk of the rally, so I am not anticipating that I am missing much.

For next week, I think weakness is on tap, but it could be mid-week before it comes. I am now leaning somewhat bearish.

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S&P 500 (C Fund)
S&P 500 INDEX,RTH (^GSPC)
DWCPF (S Fund)
Dow Jones U.S. Completion Total Stock Market Index (^DWCPF)
EFA (I Fund)
iShares MSCI EAFE Index (EFA)
AGG (F Fund)
iShares Lehman Aggregate Bond (AGG)