TSP Talk Blog

02/02/12

Same as the old month. February starts off with a bang as we saw the Dow up over 150-points during the first hour of trading in the new month. The Dow and S&P did lose some steam late in the day finishing up < 1%, but small caps and the international stocks held onto big gains.



For the TSP, the C-fund gained 0.91% yesterday, the S-fund jumped 1.97%, the I-fund was up 1.89%, and the F-fund (bonds) was down 0.13%.On Monday the narrow ascending trading channel broke (red), but the S&P 500 is still climbing along the the bottom of the old support line. It came close yesterday, to making a new high above last week's high, but as we said the rally lost some steam late in the day and closed back below the new resistance line.


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

The 20-day EMA held on the first test, a positive sign in a bull market because that can hold for months as we talked about yesterday, but the S&P has not yet tested the longer-term support line the way the Dow Transportation Index did last week.

The Dow Transports, which is the leading index, tested the 20-day EMA 7 days ago where the S&P tested it 3 days ago. Comparing the two charts and we can see that the S&P 500 remains a few days behind, and during its lead, the Transports have basically moved sideways and may be ready for another test of the 20-day EMA and the longer-term support line.


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

After the first couple of days of February, the seasonality advantage drops off sharply and, except for some spotty positive days (using the blue dots, not the red / green bars), remains fairly weak throughout the month until the final day or two of the month.


Chart provided courtesy of www.sentimentrader.com

The blue dots are percentage of times positive where the red / green bars are average returns.

Of course this chart is an average of 61 years of data which includes bull markets and bear markets and this year we are clearly in a new bull market. But February comes after the seasonally strong November through January and the market does need take a break once in a while - even in a bull market. But in bull markets, pullbacks can be shallow and quick.

Tomorrow is the jobs report. Estimates are still for a gain of around 155,000 jobs and an 8.5% unemployment rate.

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

Tom Crowley


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