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Will March go out like a lion or lamb?

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Stocks moved moderately higher on Friday as the Dow gained 35-points and the S&P and Nasdaq saw similar modest gains. There was some concern over weak housing data plus we are now heading into earnings warning season.



For the TSP, the C-fund was up 0.31% yesterday, the S-fund gained 0.78%, the I-fund made 0.20%, and the F-fund (bonds) added 0.13%.


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

The rising trend remains intact despite last week's modest losses. The S&P 500 tested the 20-day EMA early on Friday and was able to hold. The support of the rising trading channel continues to move sharply higher so we would probably need to see this week close flat to higher, otherwise any decline could break the support.


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

We've talked about the latter half of March being weaker than the first and so far it has played out pretty close to what we might expect. The early part of last week saw some selling (trading days 13 - 16) as the seasonality chart suggested. Then on Friday, which was trading day #17, we saw small gains. Small gains are on the menu today according to the chart, but things get more dicey toward the end of the week.


Chart provided courtesy of www.sentimentrader.com


We are getting into pre-earnings warning season and that tends to be a catalyst for some selling, so experiencing a little more weakness this coming week sounds about right.

According to sentimenTrader.com, commercial hedgers are net short approximately $9.6 billion worth of combined large and e-mini futures contracts in the Nasdaq 100, an all-time record.

This doesn't have a perfect record over the years, but according to our friends at ST, equities in general have fared better when hedgers were net long, or at least not extremely net short, than it has when they've hit an extreme like now.



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

Our readers got very bearish as well last week. The TSP Talk Sentiment Survey came in at 35% bulls, 56% bears, for a bulls to bears ratio of 0.63 to 1. That is another buy signal in this bull market which means the system will remain 100% S Fund for this week.

I used to be a big fan of the 10-day moving average of the ARMS Index, but over the last couple of years it has been less effective so I've abandoned it for the most part. It used to be that a move above the 1.00 area was a warning s sign.


Chart provided courtesy of www.sentimentrader.com

Y
ou can see above that it has not been very consistent when it hits that level, but its worth noting if other indicators are in agreement. The problem is, I am not seeing too much of an edge in the indicators for either the bull or bear side, so I am just keeping an eye on the support and resistance lines and for now, the seasonality chart, until I can see something more meaningful in the other indicators.

Thanks for reading! We'll see you tomorrow.



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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