Drifting higher on light volume
by
, 08-12-2012 at 10:31 PM (1938 Views)
8/13/12
Stocks closed strongly on Friday after being in modestly negative territory for most of the day. The Dow gained 43-points on the day, ending a 5th consecutive positive week for the S&P 500.
For more on the weekly, monthly, and annual returns, see the recent Weekly Wrap Up.
Daily TSP Funds Return
G-Fund: +0.004% F-fund: +0.12% C-fund: +0.22% S-fund: +0.06% I-fund: - 0.23%
If you look at the 5-day chart of the S&P 500, it looks like the opens and closes are where the action has been. There were several big opens and big closes last week, but the direction kept flip-flopping. I just thought that was interesting. Friday was the only day that had a big open and big close move in the same direction.
The S&P 500 is moving along the ascending resistance of the rising wedge. The rising wedge is a bearish formation and it may have created a flat top - another negative development.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Here's a better look at the flat top, which tend to break down.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
It looks like a flag, but a bullish flag would actually be moving down instead of making a flat top.
While the charts look a little bearish, sentiment has been so bearish that it's hard to believe that any pullback, which we are due for, will last vey long. There's too many people on the sidelines waiting for a pullback. These folks will be buyers as soon as we get a dip.
The yield on the 10-year Treasury Note confirms that we could see a modest pullback in stocks. All that would have to happen is to see this yield fill that open gap (red box) near 1.56% (shown as 15.6 in this chart.)
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
But once that gap is filled, this chart looks pretty bullish for yields as we see some decent support shaping up. When yields go down, stock prices usually go down as well - while bond prices and the F-fund go higher.
So I am looking for a pullback for stocks and yields, and a maybe a rally in the F-fund - but it may not last long. Once that gap is filled and / or that rising support line (blue) is tested, I expect yields and stocks to move back up, while bond prices and the F-fund pull back.
Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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