2007 still working
Stocks
rallied yesterday on signs that consumers are spending again and talks of a
bailout for Greece. The Dow gained 79-points, while small caps
jumped nearly 2%.
For the day, the C-fund gained 1.02%, the S-fund jumped 1.91%, and the
I-fund was up 0.75% as it was held up some by a strong dollar. The F-fund slipped
0.02%.
The S&P 500 continued to follow the early 2007 pattern. While
it's working, I won't mess with it.
The 20-day EMA is now less than 1-point from crossing back above
the 50-day EMA. The chart is looking good and that
crossover would be a plus. Technically things are doing
well, but I am concerned with economic and geopolitical events
so my foot is
still hovering near the break pedal, just in case.
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Chart provided courtesy of www.decisionpoint.com,
analysis by TSP Talk
The market leaders,
the Dow Transports and particularly the Nasdaq, also had good days,
although I'm not sure I like the looks of yesterday's inverted hammer
candlestick on the transports. We'll have to see how that plays
out.
Chart provided courtesy of
www.decisionpoint.com,
analysis by TSP Talk
The dollar seems to be trading within two rising trading channels.
It is looking a little "toppy" so that middle trendline may be the first
to go, although it has held for 5-weeks. I wouldn't be surprised
to see a test of the lower support soon.
Chart provided courtesy of www.decisionpoint.com,
analysis by TSP Talk
Last week we talked about the low Consumer Sentiment report possibly
being a contrarian indicator. When things seem to look their
worst, buying is sometimes the best option.
Our friends at sentimenTrader.com once again compiled some great data
for us showing us just that. The chart below shows the return of
the S&P 500 between 1-month and 12-months after a Consumer Confidence
report dropped 15% from the prior report, while it was already under
100, which is what we saw last week.
Chart provided courtesy of www.sentimentrader.com
The advantage to being in stocks is very obvious. Although some of
the data overlaps because of a series of bad reports ('74 and '80), in
every case of the 12 shown, the S&P was higher 6 and 12 months later,
and the gains were very strong averaging 17.8% and 23.8% respectively.
It's not surprising that it worked in February of 2009 after what
happened to stocks in 2008, but I'd be
interesting to know how
this played out after the S&P 500 had already gained over 50% in the
previous 12-months like we have today. I'm guessing its never
happened before. It's probably very unusual to see consumer
sentiment this low after a huge rally in stocks.
Thanks for reading. We'll see you tomorrow!
Tom Crowley
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