TSP Talk Blog

Despite opening higher, Friday was mostly a flat day for the indices. The Dow lost 20-points while the S&P 500 held onto some gains and the 1400 level. Oil closed at its highest level since March 1.


For the TSP, the C-fund was up 0.11% on Friday, the S-fund lost 0.07%, the I-fund gained 0.97%, and the F-fund (bonds) added 0.01%. For the weekly and monthly TSP returns, please see our recent TSP Weekly Wrap-Up.

Last week the S&P 500 broke out above the 2011 high of 1371 and the 4 closes above that level have been a good sign that it may not be a false breakout, but of course there are no guarantees. I have been calling that the line in the sand for the bulls, although the 50-day EMA is still in play as support in any bull market despite being 4.6% below where the S&P 500 closed on Friday.


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

The Dow Transportation Index is still testing the February highs. The concern here is that the leader is lagging. While the Dow, S&P and Nasdaq have all broken out to new highs recently, Transportation Index is at some potential strong resistance, and that is mostly because of what has been happening to the price of oil and gas.


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

We talked about the bull flag oil the chart of oil last week, and Friday's rally is now pushing the upper end of the flag, and possibly on the cusp of a breakout and a test of the highs made a few weeks ago.


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

Stocks and the price of oil tend to go hand in hand, mostly because good economic conditions bring about a higher demand for stocks, and for commodities including oil. The problem is, when the price of oil gets to be too high, we know it impact the spending habits of consumers, but it also impacts the price of delivering goods and even services, which in turn puts pressure on companies' earnings.

The magic number for oil has been in the $100 to $110 area when it seems that stocks get a little sluggish, so with oil back near $108 and threatening to go higher, we could see some pressure on the stock market here soon.


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

The TSP Talk Sentiment Survey came in at 52% bulls, 38% bears, for a bulls to bears ratio of 1.37 to 1. That is neutral reading which means the system will remain 100% S Fund for this week.

That 1.37 to 1 ratio is neutral but it is actually the second highest (2nd highest bullish sentiment) of the year for us.

The Smart Money / Dumb Money Confidence indicator from sentimenTrader.com shows the smart money at its most bearish reading in over a year. That's a bit concerning.


Chart provided courtesy of www.sentimentrader.com

One of the most common mistakes I have made over the years is to sell too early, particularly during a strong trending rally - anticipating a pullback. I used an IFT in January to sell and it cost me. I did it again in February, not good. Maybe the 3rd time will be the charm? I did do a little selling last week, but I have held onto some of the stock funds. Unfortunately, I may have to sit out again (in G) if oil does not start to pullback. If that bull flag breaks out on the oil chart I won't feel good about being being in stocks much longer. Selling hasn't been a good strategy for me so far this year, but I guess it is better to be safe than sorry when there are warning signs.

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

Tom Crowley


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