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Market Comments

February 11, 2011

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Today's Commentary

Nervousness but bulls hold ground

A disappointing earnings report from Cisco on Wednesday evening caused some overnight selling that carried into Thursday morning. But once again the dip buyers showed up and the 80-point morning decline turned into an 11-point loss by the close.


For the TSP, the C-fund added 0.08% yesterday, the S-fund gained 0.44%, the I-fund lost 0.86%, and the F-fund (bonds) fell 0.30%.

The S&P 500 closed up slightly but basically is in a two-day consolidation from the Tuesday high. The index is obviously extended with it trading 136-points above the 200-day EMA, but I am not watching the indicators very closely right now. It's the charts, the trend, and secondly sentiment that seems to be working and calling the shots right now.


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

One of the concerns that I have had recently was that the market leader Dow Transportation Index, was lagging badly. But after a 3-week correction and consolidation, it decided to break to the upside of the recent pennant formation. That's a very nice sign for the bulls.


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

One of our message board members (JTH) pointed out the diamond formation on the Transports chart (in blue) and I read statistics that diamonds break to the upside 69% of the time. Bingo! I was a little concerned about this one but this is now a bullish situation.

Two weeks ago today (Friday) we saw a sell-off on the news out of Eqypt. The unrest continues and may escalate in the coming days. Prior to that one-day sell off the Dow put in a multi-day flat top. Flat tops tend to lead to drops.


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

We have now seen a 3-day flat top in the Dow. Will we see a repeat drop this Friday? If so, will the flat top, market drop, give us another rebound market pop for next week? With all the uncertainty in Egypt, we could see investors pull some money off of the table before the weekend.

The TSP Talk Sentiment Survey came in at 44% bullish, 42% bearish for a bulls to bears ratio of 1.05 to 1. That is another buy signal (anything 1.25 to 1 or lower is a buy in a bull market). So, the Sentiment Survey System's allocation will remain 100% S-Fund for next week.

Thanks for reading! Have a great weekend!

Tom Crowley

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