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Yellow
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Yesterday I ended the commentary with, "No need to panic yet." How
about now?
Stocks were hit hard yesterday, as word of Obama's plan to regulate and
curb trading done by large banks hit the street. By the time he was at the mike
making the announcement, the Dow was down 185-points.
The Dow closed the day down 213-points. The C, S and I-funds were down 1.89%, 1.22% and 1.11%
respectively. The F-fund was up 0.22%.
OK, the losses weren't devastating, but it has been a while since we
have seen back to back days like we saw the last two days.
The warning flags are flying but technically, no real harm has been
done yet, but we're getting close.
I try to keep political discussions strictly on the
message board so I won't go
there now, but right or wrong, we are seeing the Obama
administration's taking action against the financial institutions as
Obama called for banks to be banned from running their own trading desks
and "owning, investing in or sponsoring” hedge funds and private equity
groups.
This comes a week after they planned to impose taxes / fees on the banks
who took TARP money, including the banks that have paid it back, with
interest.
This will hurt profits, and we know the banks will eventually pass
the costs on to us, and it will have an affect on lending across the
board. This is why Wall Street acted so negatively.
Now, this could just be an excuse for market, which has been riding high
for a very long time. We know markets don't go straight up and
perhaps it was just what investors needed to hear to start taking
profits. Technically,
this bull is not dead yet. It is showing the warning signs but the
S&P still has support.
So much for kangaroo tail reversals. The S&P 500 did find support at
the 50-day EMA and the trend remains up. All good. Volume
was high during the sell-off. It could have been a little panic
selling or it could have been the big money selling. We'd prefer
the former. The S&P is now just 75-points above the 200-day EMA,
and the PMO is back on the sell side.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
As we talked about yesterday, the trend is the key. We have lost
support from the parabolic trend off of the March 2009 lows, but for the
most part the trend is intact, support has not failed yet, and the S&P
is still above the important 50 and 200 day EMA's.
Same goes for the NYSE. The trend off the March low has been
broken, but the lows going back to August do create a less steep rising trend.
The overbought / oversold indicator has moved below the -0- line for the
first time since November. Going back to those August lows, the
market has been able to rally when we hit the -300 or lower area.
We'll just have to see what the character of this pullback will be.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
The TSP Talk Sentiment Survey
came in at 43% bulls, 47% bears for a bulls to bears ratio of 0.91 to 1.
That is below the 1.25 level which moves the system to a buy signal for
next week.
Our survey is a little more reactive than the AAII survey, although the
AAII survey was taken Wednesday of this week, not Thursday like ours, so
I would assume it would be a little less bullish than what it says here
after the 200+ point drop.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
Still, you can see that investors are more bearish then they have been
the last few weeks. It seems like we need to see the ratio get
below 1.00 before a pullback reverses, but again, if the survey was
taken Thursday, I'm guessing we'd be seeing a reading of less than 1.00.
What we
have here is a situation that is either a good buying opportunity, or
the beginning of something more serious. It would be wise to raise
your caution levels, but that would just mean to not take your eye off
the market for a a couple of weeks. A break of support would tell
us that it is time to sell rallies rather than buy dips, but we are not
there quite yet.
Thanks for reading, and thanks to all of
you who have donated to our Haiti fundraiser. Have a great weekend.
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.
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