TSP Talk - Thrift Savings Plan Strategies

Market Comments

March 8, 2010

Current TSP Share Prices

Today's Commentary (Short Term Outlook)

Pushing the limits

Stocks rallied sharply on Friday after a "better than expected" jobs report. The Dow gained 122-points and most indices were up between 1% and 2%.

For the TSP, the C-fund was up 1.40%, the S-fund gained 1.72%, and the I-fund jumped 1.79% on the day. The F-fund was down 0.24%. For more on last week's returns, please see our TSP Weekly Wrap-up.
In the first paragraph I put "better than expected" in quotes because I am feeling a little used. They had lower estimates from a loss of 20,000 jobs to a loss of 68,000, just a couple of days earlier, and then the report came in at a loss of 36,000 jobs and somehow that is good news since it wasn't 68,000?

When bad news is met with a rally in the market, that is one thing, and normally a bullish sign, but when bad news is called good news by analysts, I am more skeptical. I hate to use the word manipulation again, but something doesn't feel right.

There is a tendency for stocks to reverse big moves in the following days, that was a result of a surprise in an employment report, so we'll have to be on the lookout for that.

On a positive side, the market is behaving very well, and I am more apt to believe that then a report that has political implications. But we are seeing extreme overbought readings and overhead resistance, and despite breakouts in some indices, we are probably getting close to seeing a little pullback or consolidation. It's a little overdue according to our little 2007 rhyme, but any pullback probably needs to be bought until this market tells us otherwise.

I will show you below that we have seen some breakouts in some of the charts, but the S&P 500 is facing a double top and the upper end of the recent ascending trading channel. Of course the S&P could just continue to ride along that upper trendline, but there is a good possibility as I mentioned, that we could see a pullback.

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

A closer look at the S&P 500 shows that it has broken out of a small inverse head and shoulders pattern, which is bullish, and that actually give us an upside target of somewhere near 1160. But again, a double top and overhead resistance may have something to say about that in the short-term.


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

The Nasdaq is testing that double top right now, along with the top of the ascending trading channel resistance. There are a few open gaps that may need to be reconciled as well.



The Dow Transportation Index, another market leader, has not yet tested the old high and depending how you draw the trading channels, may be up against some resistance right now also.



The small caps of the Russell 2000, also considered a market leader, has exploded to the upside. Small caps love low interest rates and they have been thriving in this low rate environment. Next week on the 16th, there is an FOMC Fed meeting scheduled and we may be given more clues as to the near-term future of interest rates.


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

The NYSE is very clearly overbought, but that doesn't necessarily mean the market will go down. It probably will, but strong markets can hang in there even when this indicator is coming off of the extreme reading.

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

I'd be reluctant to buy with this indicator so overbought. I'd rather wait for a neutral or oversold reading.

The TSP Talk Sentiment Survey came in at 51% bulls, 35% bears, for a 1.46 bulls to bears ratio. That is a neutral reading but it's the highest ratio (most bullish) since January.

The Volatility Index has now been up 17 of the last 18 days. Another record. So far the market hasn't relented, but this is another reason to hold off initiating any new stock positions at this time.

This could be a very interesting week for stocks. The deficit problems in Greece may come to a head this week or next and I'd expect that to increase volatility.

Thanks for reading. See you back here tomorrow.

Tom Crowley

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