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New
downtrend being tested already Stocks moved higher again yesterday, making it 5 of the last 6 days, and the major indices made impressive moves above a key resistance level, but ran right into another. The Dow closed up 85-points. For the TSP, both the the C-fund and the S-fund gained 0.93 yesterday, the I-fund picked up 1.05%, and the F-fund (bonds) lost 0.14%. The S&P 500 cut right through the 20-day EMA after three failed attempts earlier in the week. It is hard to argue against a market that is trading above the 20, 50, and 200-day EMAs, with the 20-day holding above the 50-day EMA. But there is another obstacle in the way and that is the new descending trend line, which was created after the S&P 500 broke down last week.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk We want to look toward the market leaders for clues. The Nasdaq had been lagging quite a bit but the 1.4% rally yesterday broke the index above the 20 and 50 day EMA's - a very important move as far as technical analysis goes.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
On the negative side, it is also bumping up against its new descending trend line. This resistance is a
concern, but after seeing a positive outside day* on Wednesday and a
follow-through rally on Thursday taking the index above those key moving
averages, it is leaning toward being a bullish leaning chart. The Dow Transports have taken a slightly different route as it has been trading above the 20 and 50-day EMAs for four days now. It has also already broken above the descending trend line after a successful fake-out / breakout of the triangle (or pennant) pattern. All this happened while oil traded over $106 a barrel yesterday. That is some decent strength.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The index also found support on Wednesday during a positive reversal day, which followed through on Thursday. A move above yesterday's high create a higher high, thus a new uptrend.
The
small cap stocks of the Russell 2000 also made some bullish progress.
This is not the same as the TSP's S-fund, but it is another market leader
and this index is trading above the 20, 50, and 200-day EMA's, and has
also broken above its recently created descending trend line.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk I'd say the leaders above are paving a bullish path for the S&P 500, at least for the short-term. If we see the S&P move toward the February highs, then we have to worry if we will see a double top - similar to what happened in 2007.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The fundamentals are different today than in 2007, but this just shows us that a big "V" bottom can be short-lived so we have to constantly monitor the action looking for clues.
I went back and
looked, and at the time the S&P was making that new high in October of 2007,
our TSP Talk Sentiment
Survey had just posted its 3rd consecutive bulls to bears ratio of 2 to
1 or higher. A 2 to 1 or high ratio is a sell signal. Tom Crowley
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