TSP Talk Blog

1/25/13

Apple's stock lost over $60 a share yesterday and that sent the Nasdaq down but it was not enough to keep the Dow and S&P 500 down, although the S&P did close flat. The Dow gained 46-points on the day. Well off the highs, but yet another gain.

Daily TSP Funds Return G-Fund: 0.0043% F-fund: -0.04% C-fund: 0.00% S-fund: 0.38% I-fund: 0.54% More returns

The S&P 500 hit 1500 briefly on Thursday but backed off and a rising wedge (blue) looks like it will have to give. The market is due for a pullback but the question is, how serious? Dip buyers have bought all signs of weakness this year so will the first level of support hold near 1480, or will the S&P 500 look to test the 20 and 50-day EMAs, or even the bottom of the rising trading channel?


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

As we suspected, Apple's sell off spoiled the party for Wednesday's breakout in the Nasdaq 100. The 20-day EMA is being tested now, and as you can see, the Naz 100 put in a negative reversal day which tends to lead to a lower low so the 20-day EMA will be tested again right away.


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

The Transportation Index, which has been nearly parabolic since mid-November, saw another nearly 2% gain on Thursday. It has been up 8 days in a row, and 10 of the last 11 trading days.


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

Obviously this can't last forever, but this kind of strength in the Transports certainly bodes well for future economic data. The market is a leading indicator and the economically sensitive Transports is a leading index, so we can stretch that to tell us that we should probably expect the upcoming economic reports to be favorable. And Thursday's jobless claims, which came in much lower (better) than expected, is a start.

The AAII Investor Sentiment Survey (not a TSP Talk survey, which was neutral this week), came in with 52% of those asked responding that they were bullish. This is quite a large number for this survey and is actually a 2-year high.

According to sentimenTrader.com, when this bullish number is above 50% and at a two-year high, it's actually not as bearish as we might think.


Chart provided courtesy of www.sentimentrader.com

We usually look at these extreme bullish readings as being bearish, and it might be true in the very short-term, but two weeks to one year later, the returns have actually been near or above random returns.

Thanks for reading, and have a great weekend!

Tom Crowley

Posted daily at TSP Talk Market Commentary

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