TSP Talk Blog

01/31/12

Stocks gapped open lower yesterday but buyers are still lurking and buying the dips sending the indices higher and closing near their highs. The Dow, which was down 130-points during the first hour of trading, rallied to close down just 7-points.


For the TSP, the C-fund lost 0.25% yesterday, the S-fund fell 0.60%, the I-fund was down 0.98%, and the F-fund (bonds) was up 0.21%.

We saw the S&P 500 break below the narrow ascending trading channel yesterday, but this was the first time it closed below it. The index found support at the 20-day EMA before rebounding, but now we'll have to watch and see if the lower support line of that trading channel becomes resistance.


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

Taking a look at some of the short to longer term indicators, we can see that they are all pointing downward right now so yesterday's positive reversal may not have the market out of the woods yet.


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

There is still room on the downside if we look at the 50-and 200-day EMA's in the top chart, or the longer-term rising support line on the chart above, but investors may not get that lucky. There are a lot of folks who are sitting on the sidelines waiting for an opportunity to buy, and we know the market tends to do whatever it takes to make the most people wrong.

We know that our Sentiment Survey has remained on a buy signal because those polled are not getting overly bullish yet (47% bulls, 43% bears, 1.09 to ratio) despite the big rally over the last several weeks. That could mean that the rally has more legs - at least until we start seeing a numbers closer to a 2 to 1 ratio.

Barring a collapse today, the strong returns in January are a good omen for the year as you can see by the numbers.


Chart provided courtesy of www.sentimentrader.com

The yellow highlighted rows are presidential election years, which all finished in positive territory.

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

Tom Crowley


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