TSP Talk Blog

3/02/12

Stocks resumed the uptrend yesterday as the Dow added 28-points, and the broader indices performed even better. Economic data was solid and the dip buyers were back in action.


For the TSP, the C-fund was up 0.62% yesterday, the S-fund gained 0.75%, the I-fund added 0.76%, and the F-fund (bonds) lost 0.24%.

The S&P 500 popped slightly above the 2011 high again yesterday. This is the 2nd close above this level in the last 3 days. Not a bad deal, but I still want to see 3 to 5 closes before being convinced it will be a breakout.


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

We are so due for a pullback (I know, I know) that it is starting to get silly. We haven't tested the 50-day EMA since before Christmas and, assuming the market does not crash 2% today, the S&P 500 will have closed above its 20-day moving average for 50 consecutive days.

We have seen 3 other such streaks since the market bottom in March 2009. According to sentimenTrader.com:

• In April 2010 the streak lasted 49 days.
• In November 2010 the streak lasted 52 days.
• In January/February 2011 the streak lasted 40 days, but there was only 1 close below the 20-day. Ignoring that, the streak lasted 57 days.
  
  

So we're reaching the limits of the number of days buyers were able to sustain the streaks in the prior instances.

Also, as of Tuesday the S&P had managed to close in positive territory 35 times during the past 50 days. The index also reached 35 positive out of 50 trading days on 01/11/10, 4/19/10 and 2/10/11, indicated by the red arrows in the chart below.

The last two also coincided with long streaks above the 20-day average as noted above. All three of them saw the market top out almost immediately.

Chart provided courtesy of www.sentimentrader.com

The market leading Dow Transportation Index seems to have found support at the 50-day EMA and actually stuck its head back above the 20-day EMA yesterday after the 1.1% rally. It did close well below its highs but what made yesterday's gains so intriguing was that oil temporarily moved above $110 during yesterday's trading.


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

The short-term downtrend on the Trannies remains intact so I don't think the bulls can declare victory just yet, but the next couple days of trading should be interesting as so many of the indices battle key areas of resistance.

The TSP Talk Sentiment Survey came in at 54% bulls, 36% bears, for a bulls to bears ratio of 1.50 to 1. That is a neutral reading in a bull market which means the system will remain 100% S Fund next week.

Administrative Note: RevShark is offering 2 weeks of free access to his TSP Timing Newsletter and Daily Afternoon Commentary from March 1 thru March 14. Please click here for more information.

Thanks for reading! Have a great weekend!

Tom Crowley


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