TSP Talk Blog

2/17/12

Just when we thought the market was about to start to pullback, we get a big rally triggered by another better than expected weekly employment report. The Dow gained 123-points and we saw new multi-month highs on many indices. Is this a sucker rally before the pullback?


For the TSP, the C-fund was up 1.12% yesterday, the S-fund gained 1.71%, the I-fund added 0.57%, and the F-fund (bonds) fell 0.35%.

The S&P 500 closed at its highest level since last May. The rising support line held and the rising trading channel, which is looking more like a rising wedge, is narrowing as it approaches the 2011 highs.


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

We had talked about whether we could see a double top on the S&P at the 2011 highs, but then we looked at the Nasdaq 100 chart, one of leaders, and it has already blasted off to new highs. That could make it less likely that the S&P 500 would create a double top, but The Nasdaq 100 is greatly influenced by Apple, and its stock price has gone parabolic in the last 3 months so it may not be a great comparison.


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

The Dow Transportation Index, which had broken down from its rising trend and became a concern for the market, rebounded strongly off of the 50-day EMA on Thursday, but it is still below the 20-day EMA so this could be just a temporary relief rally that could have trouble getting back above resistance. I think we will find out soon enough.


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

The price of oil is back over $100 a barrel and while the rising price of oil could indicate a higher demand because of the improvement in the economy, we could also start to see it be a burden on consumers because when it remains above $100, it pushes the price of gas closer to $4 a gallon. That's not good for anyone except oil companies, their share holders, a bullish oil traders.


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

I am temped to say that yesterday's stock market rally was a sucker rally - a last push higher to suck in more buyers, just in time for a correction - but our Sentiment Survey is again telling us that investors (at least those here on TSP Talk) are still too bearish.

The Survey came in at 47% bulls, 43% bears, for a bulls to bears ratio of 1.09 to 1. That is another buy signal in a bull market which means the system will remain 100% S Fund for next week and I continue to believe is one of the reason that this rally refuses to die. Too many people are expecting it to. For my sake, and for the sake of the many bearish leaning TSP Talk survey takers, I hope they are right.

By the way, the sentiment systemis already up 11.6% in 2012. How many of you gave up on it last year? After a great 2010, which gave it a big following, it fell off in 2011. That's how these systems seem to work. They do their best after the most people give up on it. And the more that people jump on board when it is doing well, the worse it does. Why? I wish I knew.

Thanks for reading! Have a great holiday weekend!

Tom Crowley


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