TSP Talk Blog

07/22/13

Stocks opened lower on Friday, but the buyers were not far away and slowly lifted the indices off their lows as the Dow lost about 5-points on the day. The S&P 500 (C-fund), the small caps (S-fund) and the international stocks (I-fund) all managed to close in positive territory.

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The S&P 500 broke out to new highs last week and the old resistance line will now be tested as support. To keep this rally going, the S&P will have to ignore some modestly overbought conditions that have seen the index close higher in 11 of the 12 trading days.


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

The weekly chart is close to testing the top of the long-term rising trading channel, and depending how thick your red crayon is, may be there now. The trend is still up, but there is certainly a lot more room on the downside within the wide trading channel.


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

The Nasdaq 100 (QQQ) had been up for 14 straight days before taking a breather and being down 3 of the last 4 days. It has dipped below the May high and may be trying to fill the open gap from earlier this month. Friday's sell-off, triggered by the disappointing earnings reports of Google and Intel, created another open gap so now there is an open gap both above and below the current level.


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

The Transportation Index, considered one of the market leaders, made new highs last week so again our eye should be on the new support created by the old May highs.


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

The indicators are overbought, but nothing overly extreme, and sentiment is getting bullish, but also not at an extreme yet. SentimenTrader.com's rally confidence indicator is in warning territory with the smart money below 40, and the dumb money above 60, but we've seen more extreme readings.


Chart provided courtesy of www.sentimentrader.com

As July winds down, we will get into August / September, historically two of the more challenging months for stocks historically.


Chart provided courtesy of www.sentimentrader.com

If we are ever going to get a real correction, and of course we will, it may be waiting for these late summer months.

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

Tom Crowley


Posted daily at TSP Talk Market Commentary


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