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Market Comments

March 1, 2011

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Today's Commentary

Another rally, but not everyone participated

Stocks rallied on Monday although the indices were quite mixed. The Dow gained 95-points on the day, but it took a late rally just to move the Nasdaq in positive territory.

For the TSP, the C-fund gained 0.56% yesterday, the S-fund made 0.21%, the I-fund jumped 1.02%, and the F-fund (bonds) picked up 0.15%.

The S&P 500 did follow-through on Friday's gains. Volume was a little better but still light.


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

Both the smart and dumb money of the put/call ratios are getting more bearish. Surprisingly, the Smart Money OEX put/call ratio is back down to very bearish levels. This smart money indicator is not a contrarian indictor like the two dumb money ratios, but lately it has been acting rather bizarrely. The major indices have gone almost straight up since this smart money first hit a very bearish reading near 1.70. Now here it is again at 1.94.

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

You can see that at the time that smart money ratio hit 1.70 in late November, the CBOE moved toward 0.90 and the Equity ratio moved to 0.60 - and the market took off. They are all nearing those same levels. I just have a hard time giving up on this OEX smart money indicator which has been very good for a long time, but lately - not so much.
The dollar made a 4-month low yesterday but it was able to close above the early February low. The surprise move here would be a double bottom rally. The anticipated move would be a break down, which would of course benefit the I-fund.


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

The dollar always seems to do what I least expect, and this time I believe the dollar will break down, maybe after a short relief rally. Does that mean a big rally is coming?

The yield on the 10-year T-note is testing the 50-day EMA after pulling back about a lot more than I would have thought possible. It is right in the middle of the recent trading range and it will be very interesting to see how this plays out.


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

Simply put, a breakdown in this yield will be bullish for the F-fund, and a rally off of the 50-day EMA would be bearish for the F-fund, since bond prices move inversely to bond yields.

Thanks for reading! We'll see you tomorrow.

Tom Crowley
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