For the TSP, the C-fund ticked up 0.01% on Thursday, the S-fund added 0.25%, and the I-fund was down 0.72%.  The F-fund (bonds) was up 0.33% and continues to be the 2010 returns leader.  For more on the weekly and monthly returns, please see our TSP Weekly Wrap-up.

The S&P 500 opened lower on Friday, almost immediately testing the new rising support line created by connecting the higher lows.  This was very important as far as technical analysis goes and it was compounded by the fact that the index fell below the 50 and 200-day EMA's, but recaptured them by the close.


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

These kind of turnaround days tend to produce upside follow-through action the following trading day, particularly on Fridays, and with the futures up sharply as I write this on Sunday night, barring any unexpected event / news, it appears we'll have a nice positive open on Monday morning.  But I am always leery of Monday morning gap openings.  They tend to get filled rather quickly.

The S&P is in a new rising trend, but it is also looking like a rising wedge, and rising wedges tend to break to the downside, when they do break.  So while the upside is looking good in the short-term, I see a reason to be careful going forward if playing the stock funds.  The MACD indicator continues to give us a negative divergence which leads me to believe this rally could run into trouble.

The indicators are mixed for the most part but leaning toward the slightly overbought side.

The TSP Talk Sentiment Survey came in at a 1.05 to 1 bulls (43%) to bears (41%) ratio, which is overly bullish, but only if this is a bear market.  If this is a bull market, then the sentiment is neutral to actually slightly overly bears.  With the 50-day EMA still below the 200-day EMA, we are "officially" in a bear market (according to the definition I use) but it is only below it by a few cents right now so it could change any day.

I am watching bond yields closely as they will likely move with stocks.  Bonds have been resiliently strong and yields, which move inversely to bond prices, are on the brink of a break down.    

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

Should the yield of the 10-year T-Note rebound, I would expect stocks to do the same.  If the yield breaks down below the support line near 2.9%, I would expect stocks to also pull back. 

That's about all I have for today.  We are looking at a possible strong opening for stocks today and I am still leaning toward being a seller of rallies, rather than a buyer of dips, but there are signs that things are improving and it won't take too much more for that to flip-flop.  That is, being a buyer of dips rather than a seller of rallies.  Friday's jobs report may be on the minds of investors all week and should be an influence on the week's trading - another reason to expect to see some profit taking on rallies.

Thanks for reading!  We'll see you back here tomorrow.

Tom Crowley