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| Today's Commentary (Short Term Outlook) |
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Nearing another buy
signal? The Dow was flat yesterday, but stocks were mostly lower by the close. For the TSP, the C-fund was down 0.43% yesterday, the S-fund lost 0.32%, and the I-fund was up 0.30%. The F-fund added 0.05%. The S&P 500 pulled back slightly from the overhead resistance, but continues to ride above the moving averages, like a strong bull market will. We have seen this many times during bull markets, but I will just show the recent trend since the July low. Except for that one sharp correction in January, the 20 and 50-day EMA's have acted as pretty good support and decent buying opportunities for stocks. This chart only goes back to July of 2009, but this trend of trading above the 20 and 50-day EMA goes back to the market bottom in March 2009.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk I still believe we could see a move to the 50-day EMA, about 46 S&P points lower from where we closed on Monday, or even the 200-day EMA some time this summer / fall, which is now sitting about 119-points below the S&P 500, which makes the market quite extended. The point is, we have no reason to believe buying dips near the 20, 50 or 200-day EMA, won't be a good buying opportunity (that's a double negative meaning it should be a good buying opportunity). If those technical indicators start to deteriorate, such as the 20-day EMA starts to move below the 50-day EMA, or the S&P moves below the 200-day EMA, then we will have to rethink the bull case, but we are a long way from that happening. We would either need to see a large market crash, or a long period of selling before it does happen. I have not talked too much about the NYSE ARMS Index for some time as it became very distorted during the bear market of 2008, but has started to show more consistency over the last several months. I find it very interesting at this juncture, that this indicator is close to another buy signal. This is the 10-day moving average so it is more of an intermediate-term indicator than a short-term indicator.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Several years ago, a reading of 1.20 or lower (on the chart, higher in number) was considered a good buying opportunity, but as I said, things changed during the bear market. Now we are looking at 1.50 being a buy signal and surprisingly, we are closing in on one again. Now, if we can just get a move to the 50-day EMA on the S&P 500 so a 1.50 reading on the ARMS Index will confirm a buying opportunity. We know the TSP Talk Sentiment Survey already gave another buy signal for this week. Thanks for reading. We'll see you back here tomorrow! Tom Crowley |