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Enjoy the ride, but...

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3/12/12

Stocks rallied early on Friday after the slightly better than expected jobs report. By the close however, Greece was back in the headlines and we saw some profit taking. The Dow gained 14-points on the day.


For the TSP, the C-fund was up 0.36% on Friday, the S-fund gained 1.03%, the I-fund lost 0.25%, and the F-fund (bonds) slipped 0.05%.



For the weekly and monthly TSP returns, please see our recent TSP Weekly Wrap-Up.

The S&P 500 closed at the 2011 high on Friday, just below 1371. Last week's pullback did little damage after finding support at the line that connects the November and December lows. If the 2011 high can be taken out and hold for 3 or more days, I would look for it (1371) to be the next level of support. That will be the area to watch to see if this will be a failed breakout or not.


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


The market leading Dow Transportation Index is up against some key resistance as the short-term down trend is testing the top of the descending trading range and the 20-day EMA. A breakout would be a big plus for the broader stock market, and the price of oil may be the determining factor.


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


While I am encouraged by the action we are seeing in the stock index charts, the fundemental picture is getting to be more of a concern.

Hussmanfunds.com does a "Who's Who of Awful Times to Invest", and unfortunately we are meeting the criteria right now as one of those times. According to Hussman Funds:


"The following set of conditions is one way to capture the basic "overvalued, overbought, overbullish, rising-yields" syndrome:

1) S&P 500 more than 8% above its 52 week (exponential) average
2) S&P 500 more than 50% above its 4-year low
3) Shiller P/E greater than 18
4) 10-year Treasury yield higher than 6 months earlier
5) Advisory bullishness > 47%, with bearishness < 27% (Investor's Intelligence)"

The market experiences sharp declines sometime after the "Awful Times to Invest" periods. The problem is, it is not always great timing indicator. As you can see below, in late 2010 the market rallied sharply while the criteria was in play, and the market peak didn't come for several months. But clearly, trouble may be brewing if this indicator has any validity.



This is one of the main reasons why I follow the charts and not the fundamentals. Rallies can go on for a long time while the "fundies" are telling us another story. The same is true when stocks are going down. The fundies may be painting a good picture but it doesn't help us if stocks are still falling.

If you want to read more about the
Who's Who of Awful Times to Invest, please go to hussmanfunds.com.

Today is the 8th trading day in March and I wanted to point out the contrast in the seasonality picture between the first and second halves of March. After the 12th trading day, the positive bias is almost reversed. This is 61 years worth of data so there may be something to this.




Chart provided courtesy of www.sentimentrader.com

Friday would be the 12 trading day in March, and that would make sense with this being an options expiration week. It would depend on a few things, but if we can get a decent rally this week, it might not be a bad idea to take some profits before next week.

The TSP Talk Sentiment Survey came in at 49% bulls, 40% bears, for a bulls to bears ratio of 1.23 to 1. That is another buy signal in a bull market which means the system will remain 100% S-Fund next week.

The TSP Talk March Madness Contest has Started!


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

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

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. chrisbraham's Avatar
    Tom;

    Why is Rev Shark's return for calendar year 2012 showing up on Interpid Trimer's page?Intrepid Timer's return for calendar year 2012 is missing? Can anything be done to show the calendar year 2012 premium returns on a weekly basis for all the premium service providers? The last time it was updated was 12/29. Thanks
  2. tsptalk's Avatar
    Oops. I'll fix that.

S&P500 (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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