TSP Talk Blog

The market put in a very nice follow-through day after Friday's huge post-jobs-report reversal higher. The TSP stock funds were each up about 4% on the day, and surprisingly, bonds did not fall in the process.

The S&P 500 gained 3.8% yesterday and as you see by the mess in the chart below, there are a lot of things going on.

The initial resistance level was broken, paving the way for a nice rally. Once resistance is penetrated, traders are more willing to buy, and they did that yesterday. That break above the descending trend line, and the move above 900, gives us hope that at least a short-term uptrend has been established. We saw a similar higher high fail in October / November, so the test should come almost immediately.

A gap was left open after yesterday's higher open. The gap between 879 and 882 should get filled pretty quickly, in my opinion, and what happens after that should be telling.

The 50-day moving average is the next resistance level and it is near 944, but falling. After that we have another descending trend line, currently sitting near 980.


Chart provided courtesy of www.decisionpoint.com/ Analysis by TSP Talk

Volume has not been too exciting, but it is December and some traders / hedge funds are done for the year. That should keep the swings on the wild side.

The PMO indicator is looking good as it remains in a decent uptrend and on a buy signal.

Here's what I'm worried about.


Chart provided courtesy of www.decisionpoint.com

I'd love to be able to catch some upside action, but the fact that the market is so overbought in a bear market is a deal breaker for me. If the indices can pull back and get this indicator back into oversold territory without breaking this new little uptrend, I would be willing to play the upside. Until then, this train is going to have to leave without me.

The rest of this week is very important. I will not be surprised at all if we see a sell off today or tomorrow, but the question will be, can the technical picture remain in good shape if we do get a sell off? Obviously a move below 815 will be the deal breaker for the bulls. It held on Friday (818), and that's why the bulls were so eager to buy. Can they hold it again?

That's all for today. Thanks for reading. We'll see you back here tomorrow!