Weekly update ending 12/10/10

Another good week in the S&P 500 with a 1.29% gain which when added to the rest of December we now have a 5.06% for the month. The Small Cap, ($DWCPF) has also been on a roll. The Small Cap had 1.65% increase this week and is also up 5% for the month. The NASDAQ was up 1.8% for the week and is up 5.2% for the month. December is looking pretty good so far, so let’s bring in the charts and see what is going on.

There is nothing not to like here in the S&P, which in case you didn’t know is a direct reflection of the C-fund for all TSP participants. Do you know what overhead is in a stock or a index(ETF) that is bought or sold? Overhead is when individuals buy at the high, price falls dramatically and is trap in that position and cannot sell without taking a loss. So the majority of these hang-on to their losing positions and as the stock rises, some start to bailout or sell to try to lock in smaller losses and insuring to themselves that the stock will not once again go down. It normally takes about 18 months or a year and half for the majority of these people to sell all their shares, depending of course on the stock price. So if the current stock price is lower than anytime 18 months back, then you consider this overhead. Now looking at the current S&P500, there is no overhead 18 months back and we just crossed the last line of resistance and so it flips to support. Now we enter what we call the vacuum and there is nothing that technically speaking can be used to slow an upward movement. This is a major breakout and hopefully one that will continue for the near future. The MACD and the RSI look good and if you wanted to take a negative position, I guess you could say that the RSI is approaching over bought. The new red trend line on the chart shows the current long term trend and the further it pulls away from it, the more likely we could snap back to it.

So in conclusion, unless some major news comes out to destroy the party, this trend is more than likely going to continue.

The Small Cap is just in a beautiful uptrend and if your not riding this, then your missing out. The only warning at the time, is that the RSI is showing a bit over bought. This is a warning, but price and volume are by far the best indicators and this is where I put most of my weight in the decision to bail or stay in. Right now, there is nothing not to like here and I will continue riding until. I see no need in putting up the NASDAQ chart, because it is identical to the Small Cap. The European index is moving up, but I’m still guarded on this index. That’s all for now and I hope the market is being kind to you.

TSP distribution: G-fund 20%, C-fund 40%, S-fund 40%