TSP Talk Blog

With the market going up, more people get excited about buying stocks. I would think you would see a lot of bears converting over to the bull side, so why is the sentiment survey keeping people in the G-Fund of all places with it paying very modest interest?

Tom -

I appreciate your analyses, which always give me as many questions as answers (a good thing, I think, when trying to follow the markets). Regarding the "longer term," which you'll get to next week, I have a question you might want to help us with.

I've been looking at the weekly charts, and notice a disconnect between the S&P 500 and DJIA on the one hand, which have stayed below their 50-wk moving average these past 10 weeks, and NASDAQ, which has straddled it each of the last 7 weeks and closed at or above it 3 of the past 5 weeks. The Dow's and S&P's present highs do not get above where they were during peaks in April and Nov. last year, which we may interpret as resistance, and are still almost 5% below the lows of March and June this year, which may signal even more resistance. But throughout this whole 10-week bear market NASDAQ's weekly highs have been well ABOVE its April 2010 highs and AT the November 2010 highs (higher than April's on the NASDAQ) pretty much every week. It easily cut thru the March and June 2011 lows without the least resistance, and is now 8% ABOVE those lows. It's only 3-4% below its 10-yr. high of July. Also, the S&P and Dow keep straddling their 200-wk MA (is that an important line?) while the NASDAQ bounced off the space 5% above it, never reaching it.

So what gives here? How do we read the charts TOGETHER? NASDAQ looks bullish -- IS bullish (unless it peaks out now and forms a 6-mo head and shoulders portending an even bigger fall to come). But the other two are iffy, their iffiness being the involved subject of these blogs. Does the NASDAQ represent the newer economy, the innovator, the natural leader, making it a better fortune-teller than the charts of the more established economy, which will (we hope) follow? Does it all depend on whether the market is moving from bear to bull or vice versa, with different charts representing the leaders at different times? If NASDAQ is not the leader here, how do we explain why it is doing so much better? Looking at the weekly charts alone, I'd almost think the NASDAQ and S&P 500 didn't relate to the same market.

Call Me Ishmael

Originally Posted by James9779

With the market going up, more people get excited about buying stocks. I would think you would see a lot of bears converting over to the bull side, so why is the sentiment survey keeping people in the G-Fund of all places with it paying very modest interest?

We're probably too close to the bottom to have convereted enough bears to the bullish side. I am only seeing the light myself, that this rally could be more than a move to the top of the trading range. Give this rally another week or two and the bullish numbers will be well over the 1 to 1 ratio.

Originally Posted by CallMeIshmael

Tom -

I appreciate your analyses, which always give me as many questions as answers (a good thing, I think, when trying to follow the markets). Regarding the "longer term," which you'll get to next week, I have a question you might want to help us with.

I've been looking at the weekly charts, and notice a disconnect between the S&P 500 and DJIA on the one hand, which have stayed below their 50-wk moving average these past 10 weeks, and NASDAQ, which has straddled it each of the last 7 weeks and closed at or above it 3 of the past 5 weeks. The Dow's and S&P's present highs do not get above where they were during peaks in April and Nov. last year, which we may interpret as resistance, and are still almost 5% below the lows of March and June this year, which may signal even more resistance. But throughout this whole 10-week bear market NASDAQ's weekly highs have been well ABOVE its April 2010 highs and AT the November 2010 highs (higher than April's on the NASDAQ) pretty much every week. It easily cut thru the March and June 2011 lows without the least resistance, and is now 8% ABOVE those lows. It's only 3-4% below its 10-yr. high of July. Also, the S&P and Dow keep straddling their 200-wk MA (is that an important line?) while the NASDAQ bounced off the space 5% above it, never reaching it.

So what gives here? How do we read the charts TOGETHER? NASDAQ looks bullish -- IS bullish (unless it peaks out now and forms a 6-mo head and shoulders portending an even bigger fall to come). But the other two are iffy, their iffiness being the involved subject of these blogs. Does the NASDAQ represent the newer economy, the innovator, the natural leader, making it a better fortune-teller than the charts of the more established economy, which will (we hope) follow? Does it all depend on whether the market is moving from bear to bull or vice versa, with different charts representing the leaders at different times? If NASDAQ is not the leader here, how do we explain why it is doing so much better? Looking at the weekly charts alone, I'd almost think the NASDAQ and S&P 500 didn't relate to the same market.

Call Me Ishmael

Hi CMI -

The 200 bar moving average is important on the weekly chart and the fact that we are seeing the S&P get back above it is one reasons for my longer term bullishness. I'd like to see the market work off the short term overbought levels first.

The Nasdaq is a leading index, just behind the Dow Transportation Index, so if they are outperforming, look for the other indices to follow.

The Nasdaq represents tech, which usually benefits earlier in a recovery. The Transports are very sensitive to the economic environment as increases or decreases in shipping is one of the first signs that things are improving or worsening.

But yes, seeing the Naz outperform is a good sign that the bear market may have bottomed.

Breakout I guess... What I don't understand is why... there is absolutely no sane reason why this market is continuing to go up. I am sure BT is happy as a Bull in flowers, but seriously, how can anyone NOT believe that there is some serious manipulation going on; period.

The fundies come out in the charts first.

When the market was correcting there was no sane reason for it to get oversold. The market looks to the future. The 200 SPX EMA will fall on Monday and many managers will wait on the golden cross for confirmation that the bull has returned. I'm buying everything that stinks - that's how I function.