The clichés stay true

Stocks rallied yesterday as the Dow's 116-point gain took back the all of the losses from Friday, and then some; closing at a new 52-week high.

For the TSP, the C, S and I-funds were up 1.25%, 1.43% and 0.69% respectively.  The dollar rallied again holding back the I-fund some, and with bond yields up, the F-fund slipped 0.11%.  

As the title of this article says, the clichés continue to ring true.  We are seeing "sell the news" reactions to good news, and "buy the dip" reactions after the sell-offs.  The question we have been asking is whether the bulls (or former bears) will keep buying the dips because of the alleged stock pile of cash on the sidelines. 
                   
                      Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk

They seem to be doing just that but once again, the S&P 500 is 111-points above the 200-day EMA and it may be difficult for the market to sustain any continued big gains.  The trend remains up but a little more consolidation seems more likely.  The downside may be limited as well as the "buy the dip" folks continue to step up after any sell-off.

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

The dollar has rallied strongly for two days and had reached the upper end of the bull flag.  The next move will either be a ride back to the bottom of the flag, or a breakout as bull flags do tend to break to the upside.  If this happens, it will negatively affect the I-fund and bonds.

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

You can see the yield on the 10-year T-note has also been in a bull flag, and if it happens to break to the upside, bond prices and the F-fund will suffer. 

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

The victory for the republicans in the Massachusetts Senatorial race may have had something to do with yesterday's rally.  The late polls were showing that an upset was very possible and that seemed to have a positive impact on the market.  But, if our recent pattern continues, we could see a "sell the news reaction"  in the short-term, now that the election is over. 

The futures are pretty flat at the moment, and that is after a solid earnings report from IBM after the close yesterday.  IBM traded down modestly on the news after being up solidly during yesterday's trading and before the release of their earnings.  More sell the news?  Maybe.  Let's see if buyers step in and buy any dips today.

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

Tom Crowley

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