|
Sell the news... down to
support
Stocks sold-off on Friday, an options expiration Friday, with most of
the major indices losing about 1% on the day and the Dow dropping
100-points, all after we saw some solid earnings reports from Intel and J.P.
Morgan.
The obvious "sell the news" reaction took the C, S and I funds down
1.08%, 1.26% and 0.94% respectively, while the bonds of the F-fund
gained 0.21%. For more on last week's action see the
TSP Weekly Wrap-up.
The
S&P 500 broke below the rising resistance of the rapidly collapsing
wedge formation, so the bottom of that wedge came into play very
quickly. There is still decent support at that rising support line
and 20-day EMA, but the more it gets tested, the more likely it will
eventually break. For now, it is in a spot that has provided good
short-term buying opportunities.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
The sell-off in the S&P took
the index off of the extreme reading we had been seeing in the "above
the 200-day EMA" indicator (which I made up). There's no such
indicator, but we have been watching that reading closely the last
several weeks. Once we see the S&P move about 113-points above the
200-day EMA, the market seems to want to pull back. We hit those
levels a couple of times over the last couple of weeks before the S&P
closed the week less than 98-points above the 200-day EMA. A
slight improvement.
A close look at the S&P shows the current support area that needs to
hold or we could be in for a more intermediate-term pullback.
During this bull market rally we have seen many Monday rallies so let's
see if the market has one for us today. As I write this Sunday
night, the futures are pointing higher so perhaps the support will hold.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
The Nasdaq also remains in an uptrend but there are a couple of areas of
support that may come into play. There is the rising trendline,
the old resistance that could be support, plus an open gap near 2212.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
Today
is the important Senatorial race in Massachusetts that could have a
major impact on the controversial healthcare bills. The market
could react strongly, one way or the other, depending on the outcome of
this race, and how close it is. A close race could delay the
results and the market doesn't particularly like uncertainty.
Last week's TSP Talk
Sentiment Survey saw 58% bulls and 35% bears for
a 2.32 to 1 ratio. That's a little concerning, as we consider
anything over 2.0 to 1 a sell signal, although during long, strong bull
markets the ratio will see much more bullish readings, and we have been
in this relentless bull market for 10-months now. So, 2.3 to 1 is
high, but not overly alarming.
That's all I have for today.
Hopefully today's action will give us more to go on. Right now I
see market at a decent support area, which if it holds, will turn out to
be a nice buying opportunity. But if the support breaks we may
have to brace ourselves for a more pronounced pullback.
Thanks for reading. We'll see you
back here tomorrow.
Tom Crowley
If anyone is interested, I set up a
fundraiser at MercyCorps for the victims of the Haiti earthquake.
I always feel so helpless in times like these so rather than just giving
a few bucks, I thought I would do something a little more by providing a
vehicle for our readers to help also. It looks like a terrible
situation, so if we can spare a couple of bucks, it will add up.
It is a quick and painless process. Thanks!
From MercyCorps: Over the last five years, we've allocated more than
89% of our resources directly to programs. America's premier charity
evaluator gives Mercy Corps four stars in organizational efficiency.
Click here to learn more.
Mercy Corps is a 501(c)3 charity. Your gift is tax-deductible as
allowed by U.S. law.
|
