TSP Talk Blog

1/24/13

The 3 major stock indices, Dow, S&P, and Nasdaq, were higher yesterday while the small caps and the international stocks saw small losses. The Dow gained another 67-points thanks to a 4.4% gain in IBM.

Daily TSP Funds Return G-Fund: 0.0036% F-fund: 0.00% C-fund: 0.15% S-fund: -0.11% I-fund: -0.18% More returns

The nice gain in IBM offset the fact that only 12 of the 30 Dow companies were positive on the day.

The S&P 500 continues to ride along the bottom of the rising resistance line, which is the top of the ascending trading channel (red), and I continue to sound like a broken record. I had been looking for the S&P 500 to move up to the 1490 to 1500 area, and here it is now at 1495. The longer-term trend (blue) still has room on the upside, but the S&P is really pushing it by not coming off of that resistance line.


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

As mentioned yesterday, the Nasdaq 100 did breakout after the IBM and Google earnings report. But after the close yesterday, Apple posted a disappointing earnings report and since Apple is such a large part of the Nasdaq 100, the index will be under some pressure to hold above that 2750 breakout level.


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

This chart below shows that investors are very light in cash in their portfolios, and it is hitting a level that has seen some market peaks. It's close, but that red dashed "Excessive complacency" line on this chart, which is the danger zone (where the red arrows are pointing), has not been hit yet.


Chart provided courtesy of www.sentimentrader.com

I drew a blue line where the current reading is on this indicator, and drops to this blue line area in the past has usually meant more room to the upside before a correction. So, yes, a pullback / correction is coming, but exactly when, we don't know.

The January seasonality chart tells us that the end of January is a bullish time of year. This is NOT a primary indicator. I only use seasonality charts as a primary indicator around the Thanksgiving / Christmas and New Years holiday seasons. But it is what it is and the historical positive bias is quite strong. Today is trading day #16 in January.


Chart provided courtesy of www.sentimentrader.com

The yield on the 10-year T-note has been pulling back since the peak in early January, but it is now hitting the rising support line here near 1.825%. There is still an open gap near 1.76% so this area looks like an interesting test for yields.


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

If the support line holds and yields move higher, bond prices and the F-fund will pull back. If support fails here, the F-fund should get a little bounce.

Earnings will continue to roll in and today we'll see what kind of an impact Apple's weak report will have on the market as a whole. The indices have been very buoyant and perhaps looking for a reason to pull back, so this could be a test of the strength of the rally at these extended levels. Watch the close, not the open. The close will tell us if buyers are still willing to buy the dips.

Tom Crowley


Posted daily at TSP Talk Market Commentary

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