The rally that started the week before Christmas is still alive and well, helping 2012 get off to a great start. Momentum has been strong and it’s not usually a good idea to get in its way, but we are seeing signs that the market may be ready for a little rest. In a bull market however, the pullbacks tend to be benign and should be a buying opportunity for anyone who may have missed the action.
For the TSP, the C-fund gained 2.06% on the week, the S-fund was up 2.48%, the I-fund led the way with a gain of 4.057%, while the F-fund (bonds) lost 0.50%, and the G-fund was up 0.03%.
For the month, the C-fund is now up 4.70%, the S-fund has gained an impressive 6.27%,the I-fund has made 4.25%, while the F-fund (bonds) is down 0.09%, and the G-fund had made 0.08%.
Earlier this month we saw the 50-day EMA move above the 200-day EMA, and while that isn’t always an instant gratification indicator, it does officially (at least in my eyes) tell us that we are in a new bull market and can be more aggressive. That means buying the dips is the play… if we ever get one.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Obviously we will eventually get a dip or pullback – probably sooner rather than later – and just like we saw in 2009 after the 2008 bear market turned into a bull market, we should embrace the pullback as an opportunity as long as the larger ascending trends remain intact.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
Many of the indicators that I follow are telling us to look for some weakness and rather than show a bunch of them here, let me post this from sentimentrader.com which tracks the extreme readings of many indicators:
Currently 32% of the indicators are giving extreme bearish readings while none of them are in extreme bullish territory. 
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
You can see that when the bullish extremes are high, the market has a tendency to bottom and begin to rally. The opposite is also true.
Momentum can be powerful and many times the market moves in one direction longer than would seem reasonable, but we know markets do not go straight up or down forever and we are seeing the signs of fatigue in this current rally.
Good luck, and thanks for reading. We will be back here next week with another TSP Wrap Up.
Tom Crowley
www.tsptalk.com
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