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Market Comments March 7, 2011 Current TSP Share Prices Facebook Twitter

Today's Commentary

Bear flag vs. support The February jobs report came in slightly stronger than expected, but stocks could not follow through on Thursday's rally.  The Dow lost 88-points Friday but managed to close about 90-points above its low.                                                                  For the TSP, the C-fund lost 0.74% on Friday, the S-fund gave up 0.57%, the I-fund was down 0.39%, and the F-fund (bonds) jumped 0.41%.  For more on the weekly and monthly returns, please see our TSP Weekly Wrap-up.   As we talked about last week, the market rallied strongly on Thursday after a rumor that the jobs report might be coming in stronger than expected.  The report did come in slightly better than expected on Friday morning, but because it wasn't "great" we saw a "sell the news" reaction. Oil is also continuing to put pressure on the market. The S&P 500 has a little dilemma on its hands.  It is trading above the 20 and 50-day EMA and so far finding support at the bottom of its longer term ascending trading channel.  That would lead me to believe this market has a good chance to move higher this week, but that bear flag that has been forming could lead to a breakdown.                                                     Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk I think we just have to play it by ear (or eyes) and see what happens next.  The wild swings have caused me to have already used 2 Interfund Transfers this month as I have been getting whipsawed.  I'm in the stock funds currently, but a breakdown in the chart may cause me to sell and leave me with no more IFT's in March - not the best situation to be in. Crude oil continues to move higher and may be the direct cause of any sell-off in stocks.                   I wanted to take a look at a long-term view of the OEX put/call ratio because last week the indicator made a new, which means the smart money is as bearish as they have been in more than 2 decades.  It could be longer but the chart I saw only went back to 1988.                                                    Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The two prior moves below 2.0 came in 2007 and 2000, and both saw short-term pullbacks, but new highs were made within a few weeks to months of those readings on both occasions.  Whether it is a coincidence or not, while both made those new highs, those highs turned out to be multi-year peaks so this is certainty a concern for the short and long term, but perhaps not for the intermediate term. The dollar has broken down and has moved relentlessly lower since the February high, which has turn out to be a lower high, and now we have a lower low.                                                   Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk This is obviously very bearish for the dollar and as we know, this means the I-fund could outperform the other stock funds while it is trending downward.  That said, the dollar may be due for a short-term bounce, which would not help the I-fund, but looking out weeks rather than days, the I-fund is in play. The TSP Talk Sentiment Survey saw a sharp increase in bullishness after Thursday's big rally.  It is getting closer, but still not enough to move the system to a sell signal.  The bulls (55%) to bears (32%) ratio of 1.72 to 1 is neutral so the system's allocation remains 100% S-Fund for this week. Thanks for reading!  We'll see you back here tomorrow. Tom Crowley Click here to discuss today's Market Commentary

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