Coolhand's Market Analysis

As I have pointed out in the past, both in my blog and on the TSP Talk message board, whenever the Total Tracker shows a drop in total stock allocations below 40%, the market tends to go higher. At Friday’s close, total stock allocations fell to 37.67%. That’s a buy signal for the new trading week. There's a chart in my weekly analysis that you can access in the premium area that provides more details. I also have a buy signal generated for the Top 50 as they reduced their overall stock exposure by 10%. Ten percent is the minimum level necessary to trigger this signal. There have been four other times this year when a buy signal has been triggered and each one proved correct. Last year, buy signals were correct 77% of the time. Here's the charts:




As you can see, stock allocations dipped by 10% this week for the Top 50, triggering a buy signal.




Total stock allocations across the auto-tracker fell by 3.58% this week, which wasn't a big shift, but total stock allocations are now well below 40%. Statistically, the market tends to move higher the following trading week when allocations are this low.



There are now 6 gaps below current price and gaps usually get filled at some point. There is also a possible bearish double top formation in play. The VIX is currently in an area that's seen pullbacks earlier in the year too. I’m showing both longer term and intermediate term support lines as points of reference as they could be targets for any pullback we may get. The problem is, there are buy signals this week and liquidity continues to support the market. The relative strength indicator remains very positive. MACD (momentum) is also positive, but is now pointing lower. Looking at the volume bars, we can see there’s been a lot of accumulation in recent weeks. We’re due a pullback, but with mixed signals like this I think it spells volatility with a continued upward bias.

Our sentiment survey remained on a buy for this week, although it should be noted that the system is neutral overall.

To see this week's full analysis, follow this link http://www.tsptalk.com/members/.