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| Today's Commentary (Short Term Outlook) | ||
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Bigger is not always
better Stocks gave back some early gains yesterday, but did manage to close in positive territory. The Dow finished up a couple of points, but well off its high. The broader market indices fared a little better. Once again small cap stocks led the way as the S-fund picked up another 0.80%. The larger stocks of the C-fund gained 0.23%, and the I-fund was up 0.59%, while the dollar lost ground. The F-fund gained 0.08%.
 Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk We have a little inverse head and shoulders breakout showing up, which is usually bullish, but we are not seeing the volume you'd like to see on a breakout. The market leaders were mixed yesterday as the Nasdaq gained 0.3% and the Dow Transports dropped 0.5%. Both closed well off their highs after flirting with upper resistance. The Nasdaq has a couple of open gaps that may need to be filled eventually, and the Transports put in flat top with Monday and Tuesday's highs stalling in the same area near 4200. I knew I didn't like the look of Monday's action in the Transports and now most of the indices saw that same weak close on Tuesday.   Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Taking a look at the various indices, you can see that the larger stocks have been lagging lately as the S&P 100 - the largest 100 companies in the market - is well off of its 2010 high, while small and mid-cap stocks have actually made new highs for 2010, although we have to worry about possible double tops in those indices.    Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk If we get another positive day in the Russell 2000 and S&P 400, we could have a legitimate breakout. If not, it could be a double top. We'd like to see some volume accompany a breakout as there just hasn't been much participation in the recent rally. As I mentioned above, if the "bigger money", or intuitional investors, join in now that the S&P 500 is firmly back above the 50-day EMA and simple moving averages, we will see that volume pick up and others may follow along. With the technical picture getting better, I would expect dip buyers to step up during pullbacks, provided the S&P 500 can stay above the 50-day EMA, and with many of the indices near or hitting overhead resistance and getting overbought, it wouldn't surprise me to see a little tentativeness leading into Friday's jobs report. But you don't want to fall asleep too long. I don't think the dips will be too severe if we get them. Consensus estimates for the February jobs report due out Friday morning are for a loss of 20,000 jobs and an unemployment rate of 9.8%. Briefing.com has their estimate at a loss of 50,000 jobs with an unemployment rate of 10.0%. Some are concerned that the winter storms will have pushed these numbers even lower, but if they are thinking it, then it is probably already in the estimates. If there is going to be a sharp pullback - whether temporary or longer lasting, it could be triggered by a bad jobs report, the Fed meeting on March 16, or more economic woes in Europe. Thanks for reading. We'll see you tomorrow! Tom Crowley |
