TSP Talk Blog

11/01/11

Stocks pulled back sharply yesterday on some negative news out of Greece, the news of a major hedge fund filing for bankruptcy, and some old fashioned profit taking on the last day of a huge month for stocks. The Dow lost 276-points.


For the TSP, the C-fund lost 2.47% yesterday, the S-fund fell 2.42%, the I-fund plummeted 4.92%, and the F-fund (bonds) gained 0.46%.

The S&P 500, and all of the major indices, were due for a pullback, but the severity of yesterday's sell-off was a bit of a surprise. Still, the uptrend has not been broken and the volume was very light considering the damage.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The Nasdaq had a large gap open from last Thursday's rally and yesterday's pullback filled about half of it. The bottom of that gap could act as support.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The market leader Dow Transportation Index also remains in an uptrend following the sharp, light volume, sell-off.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

The NYSE was near an extreme overbought level, as were many indicators, and the action over the last two days has helped take them off those extremes. The indicator has been pinned on the overbought side but I see this as a positive.


Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

When we have seen the indicator shoot up from an oversold condition into overbought territory and stayed there, it has led to what looks like good intermediate to longer term bottoms.

Seasonally, the first 2 days of November have had an upside bias, with a positive return in 21 out of 29 years since the S&P 500 futures started (including 8 of the last 10 years).

On the negative side, we have recently had what they call the Harvard Business School sell signal.

"For years, a consultant named Ray Soifer has analyzed the career paths of freshly minted Harvard MBAs looking for signs of the economy.

"According to Ray Soifer, when more than 30 percent of HBS grads take Wall Street jobs, it's a strong sell signal."

This is not a short-term indicator by any means, but the number hit 38% this year.

More: Harvard Business School sell signal

We have an FOMC meeting today and Wednesday with a policy statement announcement on Wednesday, plus the October jobs report gets released on Friday morning.

Thanks for reading! We'll see you back here tomorrow.

Tom Crowley



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