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Market Comments

February 8, 2011

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Today's Commentary

Cringing

Stocks rallied yet again yesterday, and that's now 10 of the last 12 days that the Dow, which gained 69-points on the day, closed higher.

For the TSP, the C-fund gained 0.63% yesterday, the S-fund was up 0.91%, the I-fund added 0.57%, and the F-fund (bonds) picked up 0.08%.

I am starting to have some mixed feelings. We know the S&P 500 is in a remarkable bull market and positive trend but if you've made some money over the last few months you have to cringe a little when you look at this chart. The index moved to the upper end of its recent ascending channel, and actually popped above its longer term positive trend. It is also now 138-points above the 200-day EMA, which is really getting extended.

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

We see a new buy signal from the PMO indicator, but it has been moving sideways for the last several weeks, above and below the buy / sell levels.

If I decide to step aside, there's no way I want to fight this positive trend for very long, and it might be foolish to try, but I would love to be on the sidelines to watch the S&P consolidate back toward the bottom of the trading channels.

The Dow moved above its rising trading channel and snuck back into it by the close. This is an extremely bullish chart / trend but we know it can't go up forever without taking a breath now and then.

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

The Nasdaq chart looks great too, as it gapped up to new new highs yesterday and that old high could now act as support. We'll give it the 3-day test to see if it can hold.


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

The Dow Transportation Index is a concern. This is one of the main market leaders, if not THE market leader. Volatility has picked up and it has not really participated in this recent rally from the pullback.

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

It does remain above its 50-day EMA and the rising trendline, which is a positive, but I'd really like to see it break above its recent descending trend, an area that gave it problems yesterday as it fell back after hitting that resistance line.

If the Transports can rally today back above the 20-day EMA and the descending resistance line, it might change my mind, but I think it may be time to let the market exhale for a few days.

Thanks for reading! We'll see you tomorrow.

Tom Crowley
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