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| Today's Commentary (Short Term Outlook) |
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Resistance and 3.0 Stocks were flat to mixed yesterday as the Dow closed 8-points higher, while the S&P 500 was down, and small caps did well. After the close, eBay was the big name reporting and while they beat estimates by a penny a share, their forward guidance was weaker than expected and the stock sold off over 8% in after hours trading, and the index futures were trading slightly down as well. The TSP funds were mixed. The C-fund slipped 0.10%, the S-fund gained 0.37%, and the I-fund fell 0.36%. The F-fund rallied 0.23%. The S&P 500 is really testing support and resistance as short and longer-term trend lines are converging and are ready to cross. Trading at the higher end of the longer-term trading channel puts the risk / reward much closer to the risky side as we could actually see a move down toward 1100 (100 points lower) and the S&P would still be in the rising trading channel. But the way this market has been going, would anyone be surprised if the market took the high road and broke out to the upside of this channel?  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The MACD (bottom indicator above) continues to point toward a negative divergence, but this has gone on for so long that it has become the boy who cried wolf. It's tough to take it seriously. The results of last week's Investor's Intelligence Advisor sentiment survey came out and with the bulls at 53%, and the bears at 17%, and the ratio is back over the 3.0 to 1 level. We saw it a few times late last year and just before the January pullback, but prior to that we had not seen a 3 to 1 ratio since the bull market market peak in late 2007.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk I wanted to bring up the bond yields again as something interesting happened. We have talked about the open gap and the rising support line of the 10-year T-note. We have been looking for this pullback since the yield hit 4% earlier this month. While the pullback has been steady, there is still room for the yield to move down before our target is hit. 
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk But as we look to the yield of the 30-year bond, you can see that the gap was filled yesterday.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk It will be interesting to see if the 30-year yield gets a bounce here as it may mean that the play in the F-fund has run its course (since bonds go down when yields go up). If the 30-year yield continues down, and this support of the filled gap does not hold, it may mean lower yields and better news for the F-fund going forward. One more thing to point out. The Housing Market Index has been red hot, and this is obviously a good sign, but the recent breakout above the September '09 highs, and above the rising trading channel, could either be starting some kind of parabolic move higher, or it could be the start of a blow-off top. That was a nice base it formed from September until earlier this month, but it is up about 25% since February and it may need a break.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Why mention it? No specific reason. I just hadn't checked this chart in a while and I was surprised to see how well it has performed. It's a good sign for the economy, but like the rest of the stock market, it may be getting too hot. Thanks for reading. We'll see you back here tomorrow. Tom Crowley |