Update - Going 100% I fund Friday morning, effective Monday.

** It doesn't appear the email alert went out timely.  My thinking for this move was a big bounce in U.S. stocks may produce a rally in the overnight markets of the Far East and Europe early next week (Sunday night here).  With the market well off it's high as of 2:00 PM ET, this isn't as appealing as it seemed earlier.  I still plan to move to the C and S funds if and when we test the recent lows next week.

I don't know the status of the TSP offices for the holiday Monday.  The stock market is open but I'm not sure if we will be able to make transfers.  You may want to act today to have one effective Tuesday. 
 

Terror, fear, pain, oversold, support, and risk.

Only a late rally saved the market from a third straight 1% loss yesterday.  After seven consecutive up days, we've now seen four negative days in a row.

Many fundamental investors believe that technical analysis is about on the same plane as tarot card reading.  I don't think so but it may be that it is just a self-fulfilling prophecy.  On Wednesday the S&P dropped and sat on the 200-day moving average at the close.  Thursday saw the mid-day free fall stop on a dime on the lower bullish trend line.  I say self-fulfilling because technicians tend to buy at support levels and put their stops just below them.


                      Charts provided courtesy of www.decisionpoint.com

After this week's carnage there is a high odds probability that we will see a short term bounce.  I feel very confident, however, that the actual low has not put in, or at the very least, it will be tested again in the coming days or weeks.  A rally here is likely but you have to be careful as it is just as likely it will be short lived.  The points on the chart marked A, B, C, and D all show two or more very week days in a row but that a lower low or a test of that low was made again in each case.

If you want to roll the dice and try to catch a bounce, be quick, and don't get greedy.  If you are looking to establish a position in stocks for a longer term investment, you may want to put some money to work now.  Maybe 25% or 30%.  Then you can use later weakness to add more.

The odd-lot traders are at it again.  The odd-lot traders are traders who buy and sell fewer than 100 shares of stock at a time.  This is the less sophisticated money.  That is politically correct for dumb money. 

The odd-lot traders are selling short (betting against stocks) at extreme levels again.  On Wednesday 4.6 million shares were sold short by these small traders.  That is 17% more than the prior record made back in April.

      
                       Chart provided courtesy of www.sentimentrader.com

This is a fairly consistent indicator but it is a short term indicator as it can move back down within days.  You can see that in April the low was made but there was one little rally that was sold off just after the odd-lot short sale peak. 

Unless the market takes off on Friday morning, there is a very good chance I will make a short term move into stocks soon.  Possibly today.  But I want to talk about something I mention every now and then.  The market seems to have an insight into things that haven't happened yet.  When the market moves up you tend to see the good news later, and vice-versa.  My favorite example is when the Dow was down about 10% during two weeks prior to September 11, 2001, which came as a surprise to everyone.  Things that make you go hmmmm.  Now we have a big sell off for three days and we are hearing rumors of potential terrorist attacks in NYC. 

So while I may want to jump into stocks now, we may to have a lot of guts, heart, or maybe a lack of brains, to do it with this panic in the air, right?  Ah, there's the rub.  That's the best time to buy.  Just be ready to sell if you can pocket a quick profit.  You want to sell to those odd-lot traders who will be covering their short sale positions just when the rally is completing. 

That's all for today.  Currently 100% G fund but ready to test the water for a short term trade - if the market isn't up too much Friday morning.  In that case I will wait a few days for a test of the low.  Stay tuned.  Thanks for reading.