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Sensing the frustration

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02/03/12

The Dow closed down 11-points yesterday but stocks were mostly higher on the day as the S&P 500, Nasdaq, small caps, and I-fund stocks all posted modest gains.


For the TSP, the C-fund gained 0.12% yesterday, the S-fund was up 0.35%, the I-fund made 0.25%, and the F-fund (bonds) picked up 0.08%.

I am often asked if it is difficult to come up with something to talk about every day and almost invariably the answer is, no. There always seems to be something going on that is worth writing about, but I have to admit this type of market does not make it easy.

The rally has been relentless and I can hear the frustration from some of our message board members who are missing out. They want to know if they should just buy here because they are sick of missing out on the gains.

The market loves this game. It wants nothing more than to get you to give up and buy the runaway market, just in time to trap you and then pull back.

Our Sentiment Survey shows me that, despite the relentless gains, many of us are on the sidelines expected a pullback. The bulls (50%) to bears (42%) ratio of 1.19 to 1 is again low enough to trigger a fresh buy signal. That's 3 buy signals in a row and 4 in the last 5 weeks. I am guessing that we won't see any significant sell-off until more of us give up waiting and that ratio gets much closer to 2 to 1.

The ironic part is that since the bulls to bear ratio is in our buy area, the market could still go higher. I hate to chase any market but when the bearish percentage is this high, and the ratio is this low, that's a pretty good indication that there is still some fuel for this rally. After all, the bears are the fuel to a market rally as they are the one who are doing the buying now. The bulls have already dome their buying.

Anyway, here is the chart. Nothing much has changed...



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

Estimates for today's jobs report are still for a gain of 155,000 jobs and an unemployment rate of 8.5%

Here are some stats from our friends at www.sentimentrader.com:

The last 8 Fridays when the Nonfarm Payroll report was released have opened mixed, but all closed lower than the day before.

If you bought at the open on every Nonfarm Payroll day and sold at the close, you wouldn't have had a +1% gain since way back in September 2009. The last 28 have all shown either a loss or small gain.

There have been 14 times the S&P was sitting at a six-month high the day before a Nonfarm Payroll report since 1997.

There was a modestly positive bias the day of and after the report, with the S&P up 63% of the time. For the rest of the month, it was positive 52% of the time, with an average return of -0.7%, average drawdown of -2.2% and average maximum gain of +2.0%. Pretty mixed.

There were only two times it happened on the February release, in 2007 and 2011. Both times, stocks gravitated modestly higher for the next couple of weeks, then started to crack near the end of the month, erasing the entire year's gain up to that point.
Thanks for reading! Have a great weekend!

Tom Crowley



The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.

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Comments

  1. valleymd's Avatar
    The buy-and-holders are absolutely loving this market, hoping it never ends.
  2. tsptalk's Avatar
    Every dog has it's day.

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