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Here I present two pieces of evidence:
The US dollar is getting overbought in the longer term. The US dollar index, daily cash settlement, for the last two years is shown on the chart below. A breakdown below the brown line occurred in February of 2011. After the low in May of 2011 there has been a steady rise in what looks like five waves, and now $US backtests the brown line. When this advance fails, the rally should be underway. A prominent negative divergence is on the RSI
Make it eight negative Mondays in a row for stocks. The indices opened sharply lower yesterday and while the Dow did make a decent comeback from its early 240-point decline, it still ended the day down 101-points.
Stocks sold off on Friday as Spanish bond yields spiked above 7% - a level that has meant trouble for other European countries. The Dow lost 121-points on the day.
Volatility continues to hamper confident positioning when it comes to TSP Management. Overall stock positions remain conservative, while bond and cash levels rise going into the new trading week.
The Top 50 dropped their stock exposure by 8.7%; from 28.2% to 19.5%. This group is also sporting a higher bond allocation than stocks.
Europe trumps earnings
Second quarter earnings have been pretty good so far and we hadn't been seeing the typical mid-July "sell the news" reaction this year, but troubles in Europe with Spanish yields rising well above 7% on Friday, a new high in the euro era, and stocks backed off.
Here are the TSP fund returns for the week of July 16 through