Stocks ended last week on a positive note as the pre-holiday bullish bias seemed to work out. With today’s Inauguration many folks are anticipating a rally based on the hope of change, but it may be too much to ask for.
The S&P 500 did make some positive moves late last week but the chart continues to struggle to make any bullish formation stick. The S&P is in a down trend, the faster moving averages are below the slower moving averages, the attempt to make a higher high has now failed, and the PMO indicator (momentum) is giving another sell signal – similar to what we saw in May and September of 2008.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
We may have seen a little, buy the rumor, on Thursday and Friday of last week, and today we could get the sell the news. We saw a similar reaction surrounding Election Day when stocks rallied up to, and on Election Day, but fell off precipitously starting the following day.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
There’s seems to be the desire for hope, that change in Washington will make all of the problems go away, but I don’t think it will work like that. And that may be why we get the rallies before – hope, but it does not stick – reality.
Before the late rally last week, the sentiment surveys had been showing signs of a lot of bearishness (which could be bullish) and the put/call ratios have shown that the “dumb money” is backing down from their “irrational exuberance” after the Santa Claus rally a couple of weeks ago. At the same time, the “smart money”, who was also getting optimistic, has not become more bearish.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
It will be interesting to see if these overly bearish readings can help the market hold the November lows, if they were to get tested in the coming days and weeks.
The overbought / oversold indicator is back near the neutral area after its recent move from extremely overbought to oversold, so I don’t see an edge here either way in the short-term.
Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk
That’s all for today. These commentary are updated daily on TSPtalk.com. Join us on the TSP Talk message board. Thanks for reading.
Tom Crowley
I thought it was interesting how the only other story on the front page of the Post today was about the markets sliding. Looks like we are still unclear how much the financials have to fall. And the Microsoft layoffs are still looming.