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Fund share prices as of: 11/01/07
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Today's Comments (Short Term Outlook)
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Post Fed sell-off We talked about the market reversing any reaction the market made after the Fed announcement but this was something different. The major indices lost nearly 3% on the day as there was a touch of panic in the air. This wasn't just a post-Fed profit taking session, but we also saw some analyst downgrades of some major financial companies. Those analysts are pretty smart (not) downgrading stocks after they have already lost over 25% of their value. Used as a contrarian indicator, these downgrades could make some bank stocks a buy for the intermediate to long-term. Even the very strong seasonality of the 1st of November, which is positive 59% of the time over the last 57 years, and the first trading day in November (which isn't always the 1st), which is positive almost 70% of the time, was not enough to withstand the news.  Chart provided courtesy of www.sentimentrader.com I do believe it was an overreaction and we could see a hasty relief rally as we head into the strong seasonal period. Taking a look the chart of the S&P 500, we can see a mirror image type pattern forming. If it continues we could possibly see another 10 or 20 points to the downside before seeing a rebound back to the 1550 area.  Chart provided courtesy of www.decisionpoint.com It's been quite a week and it will be punctuated today with October's jobs report this morning. This could have the fire power to either see the S&P drop that 10 or 20 points, and/or we could see a relief rally before the day is done. The short-term indicators are oversold enough where a bounce is likely - no matter how long it may or may not last. The "smart money" OEX put/call ratio, which if you remember saw a steep one day decline (which was a short-term bearish signal for stocks) rebounded back to a more bullish reading, which coincides with the new buy signal from the TSP Talk Sentiment Survey system for next week. This week's poll saw a 0.91 to 1 bulls (41%) to bears (45%) ratio which is well below the 1.25 to 1 ratio needed for a buy signal. The lower the ratio, the more bullish it is for stocks. These signals are not too quick to change but do not always give instant gratification - meaning the market may rally in the next week or two, but it doesn't mean we are immediately out of the water. The 0.91 level does tell us that anyone who wanted to sell, has probably done so, so we may be running out of sellers. That's a convoluted way of saying the market could do well because there is a lot of cash available to buy. That's all for today. Have a great weekend! Have questions? Visit our message board for answers.
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