View RSS Feed

TSP Talk Blog

Things look great technically for stocks, but...

Rate this Entry
Stocks rallied on Friday and the Dow led the indices with a gain of 269-points, or 1.03%, after some better than expected earnings out of the financial sector. The other major indices each added about a half of a percent or so, which was just enough to push the S&P 500 into the green for the week after struggling earlier. Bonds were down as yields rallied, also helping the banks stocks.

Daily TSP Funds Return


Earnings season got off to a good start and the Dow was the major benefactor with financials rallying and also Disney popping after they announced a streaming service at a lower price point than Netflix.

It will be a busy week for earnings this week, and for the next 2 to 3 weeks we might see some market movers out there. The problem is, stocks have been pricing in nothing but good news since the December lows, and with the Fed back on the market's side, perhaps it is justified. But as you'll see below - whether you're reading the free public commentary or the TSP Talk Plus premium report - things may be looking too good and complacency is getting too prevalent as the rubber band stretches toward a potential breaking point, so a sell the news reaction may be setting up.



The S&P 500 (C-fund) opened sharply higher again, opening yet another gap on the chart. It is hitting an overhead resistance line, but that line is rising. That is a wedge-like formation but so far that bearish pattern hasn't been a problem for the index.




Taking a closer look shows the gaps that are still open and potential pullback targets. Although not 100%, it's usually just a matter of time before gaps get filled. They tend to get filled sooner rather than later, but some can take months or even longer, but in the case of three being open, I think it won't take too long for one or two of them to be filled here.




A longer-term chart shows some of the key levels (red) for the S&P 500 where we saw some major turning points or resistance. The blue rising wedge is also a potential sign of trouble, but ...




... as we saw in 2007, we could see new highs, just to suck in some of the remaining bears into the bullish camp, just before ...




... the beginning of the end - or at least that was the case back then. The point is, as great as things feel right now, the closer we get to the peak of complacency from investors.




Here's another interesting contrarian indicator from our friends at sentimentrader.com where Wall Street analysts love the charts (yes, they look good as we approach the old highs) but the fundamentals just don't concur. It's been a negative for stocks going out 1 - 2 months, but it's a small sample so make of it what you will.


Chart provided courtesy of www.sentimentrader.com


As yields rallied on Friday, bond prices fell and the AGG (Bonds / F-fund) may be looking to fill that open gap near 108.




Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php

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

Tom Crowley


Posted daily at www.tsptalk.com/comments.php


The legal stuff: This information is for educational purposes only! This is not advice or a recommendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.

Submit "Things look great technically for stocks, but..." to Digg Submit "Things look great technically for stocks, but..." to del.icio.us Submit "Things look great technically for stocks, but..." to StumbleUpon Submit "Things look great technically for stocks, but..." to Google

Comments


SPY (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
AGG (F Fund) (delayed)

(Stockcharts.com Real-time)