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Looking for direction

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Stocks were mixed on Friday and lost their large earlier gains as investors appeared leery about holding over the weekend again. The Dow gained 65, the S&P was flat, and the Nasdaq closed down on the day.


For the TSP, the C-fund was up 0.12% on Friday, the S-fund gained 0.31%, the I-fund made 0.62%, and the F-fund (bonds) lost 0.07%.

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

Historically, the Monday after April's option expiration week is quite weak. According to sentimenTrader.com, over the past 20 years, the S&P 500 futures have been positive the day after April option expiration (the third Friday of the month) only 30% of the time. However, from the next Monday's close through Friday (meaning from the close of 4/23 through 4/27 in our current case), it was positive 80% of the time averaging +0.8%. The last 8 years have all been positive during those 4-day stretches.

Unfortunately, I'm not so sure the S&P 500 can handle a much of a negative day today as it is barely hanging onto support and the bear flag. A modest loss, yes. A big loss, I don't know.


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

The bear flags are still flying and it has me concerned. The S&P bear flag is obvious.



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

The NYSE's looks bad too, and the NYSE is currently trading below the 50-day EMA.


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

The Russell 2000 is in the same situation - bear flag below the 50-day EMA.


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

Here is a chart of the Philadelphia Semiconductor Index. It had a bear flag, and this is what a breakdown from a bear flag looks like...


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

I took a look at several charts and I found a few that had a bear flag, but instead of breaking down, they broke to the upside...




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

The odds favor a bear flag breaking down but as we can see it is not a slam dunk. If the market has anything on its side - other than the S&P500 still trading within the rising trading channel - it is that investor sentiment turned quite bearish last week; in both our survey and the AAII survey.

Our TSP Talk Sentiment Survey came in at 40% bulls, 45% bears, for a bulls to bears ratio of 0.82 to 1. Excessive bearishness is usually a bullish sign for stocks. The 0.82 to 1 ratio moves the system to a 100% S fund allocation for this week.


Thanks for reading! We'll see you back here 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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