TSP Talk Blog

5/30/12

Despite some questionable economic data, stocks rallied yesterday showing us that Greece is still center stage for the market as there was some optimism out of Europe.

Daily TSP Funds Return G-Fund: +0.004% F-fund: +0.04% C-fund: +1.12% S-fund: +1.34% I-fund: +1.09%

The S&P 500 broke to the upside of its recent consolidation, after holding above the 200-day EMA for 5 straight days. The concern was whether this consolidation was a bear flag, which would have a tendency to break down, but instead the bulls were able to push the index to a 9-day high yesterday.


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

Nothing to get overly excited about yet as we could always see a test of the lows again, but I have noticed that these drops that consolidate and break to the upside, do tend to follow through for at least a few days.

For some, it's just a short rally that eventually reverses, but some of these consolidations precede explosive rallies that last much longer.


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

The indicators are getting mixed as the indices are well off of the oversold levels they hit a week ago, and the sentiment related indicators are coming off of the extreme bearish readings we've seen.

The Investor Intelligence Adviser Sentiment survey, considered one of the dumb money sentiment surveys, is showing that both the bullish and bearish percentages are fairly low. That's a lot of indecisiveness and that doesn't surprise me as this market seems to be a big question mark for many investors.


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

What makes this survey interesting is that the bearish percentage is so low despite the the S&P 500 being near a 3-month low. Of course our friends at sentimenTrader.com were all over this and it showed that is was a pretty positive sign for the market going back to 1969.


Chart provided courtesy of www.sentimentrader.com

It is positive but take a look at the numbers if the bearish percentage was over 27% (in italics just below the main table above.) So the lack of bears didn't keep the market down, but the average return was significantly lower with the lower bearish percentage.

The smart money of the OEX put / call ratio (green chart) is using this recent push higher to get more defensive. The 10-day moving average of the dumb money (CBOE and Equity put/call ratios) is still in an overly bearish area (which is bullish) but starting to head higher. This could be a sign that there is a little more upside to go for stocks.


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

But you know that smart money will keep getting defensive and that indicator will keep falling as the market rises so I don't expect too much in June since they (the smart money) are already pretty bearish. We may want to take what we can get during the next 6 to 7 day seasonal strength and then consider taking some profits.

The final two days of May are historically quite strong and Friday is the 1st trading day in June:


Chart provided courtesy of www.sentimentrader.com

Of course what happens between now and then could change the outlook. Greece is the word and we're always just one bad headline away from another sell-off.

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

Tom Crowley


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