Market Comments December 10, 2008 TSP Fund share prices as of: 12/09/08 Fund - G Fund F Fund C Fund S Fund I Fund 12.7193 12.2918 10.2413 11.4993 13.2732 $  Change - 0.0009 0.0545 -0.2407 -0.2728 -0.0709 % Chg day - +0.01% +0.45% -2.30% -2.32% -0.53% % Chg wk - +0.03% +0.48% +1.47% +1.94% +4.10% % Chg mon - +0.07% +1.35% -0.80% -1.39% +0.24% % Chg 2008 - +3.58% +3.03% -38.16% -41.89% -46.39%   L2040 L2030 L2020 L2010 L Income 12.0227 12.2082 12.5011 13.6216 12.6476 $  Change - -0.1730 -0.1547 -0.1305 -0.0710 -0.0430 % Chg day - -1.42% -1.25% -1.03% -0.52% -0.34% % Chg wk - +1.97% +1.72% +1.46% +0.76% +0.50% % Chg mon - -0.24% -0.15% -0.04% +0.11% +0.13% % Chg 2008 - -34.09% -29.88% -24.92% -11.89% -6.11%

Today's Comments (Short Term Outlook)                             Printer  friendly

I'm not seeing the bullish case yet After a two-day rally, stocks took a break.  The C and S funds were off 2.3% while the I fund faired a little better, being off just 0.50%.  Bonds continued their rally as the F fund gained 0.45% on the day. From Friday's low to Monday's high the S&P 500 had jumped over 12%, so it was reasonable to expect a pullback.  As bad as the 2.3% appeared, neither the bulls nor the bears could take charge as the chart shows us that the index put in an inside day, meaning the yesterday's high was lower than Monday's high, and yesterday's low was higher than Monday's high - but the gap near 879 remains open and will likely close soon.  That could act as support for this pullback, but the market is still quite overbought in the short-term.                                   Chart provided courtesy of www.decisionpoint.com We've discussed the overbought condition of the market over the last couple of days.  Let's take a look at sentiment today by way of the put/call ratios. The three put/call ratio I watch are the CBOE, the Equity, and the OEX.  The CBOE and Equity put/call ratios are considered the dumb money, while the OEX put/call ratio is considered the smart money.  The smart and dumb money tend to view things quite differently.  The 10-day moving averages of these indicators show us that the dumb money has been getting more and more bullish over the last couple of weeks, while the smart money has become more defensive.  Notice how at market peaks and bottoms, these indicators are going in opposite directions.  While the CBOE and Equities were reaching toward new highs at market peaks, the OEX was stretching downward.  That's where we are now.                           Chart provided courtesy of www.decisionpoint.com / Analysis by TSP Talk The current 1.35 put to call ratio on the OEX is closing in on the low reading of the year, only matched during the market peak in May.  While the CBOE and Equity ratios are not making new highs, they are nearing them and are also up against declining resistance as the longer-term bullishness trend slowly moves lower. These are not a great signs for the near term. The VIX has moved well of if its recent highs above 80, and is now about 59.  The move to 59 was enough to close the open gap created during the Dec 1st sell-off.  We could see a move back down toward the lower Bollinger Band, which also happens to line up with the ascending support line near 54, but with the gap closed, it is free to move up or down.                                      Chart provided courtesy of www.decisionpoint.com I realize that I am being quite bearish at a time when stocks tend to rally into Christmas.  I also know that there are a lot of very bright people out there who are getting bullish and are looking for a continued rally.  There are some signs of some internal improvement (Trader Fred subscribers will see that in one of his charts today), but I'm just not seeing this as a good time to be a buyer.  Perhaps the strong seasonality will overcome the overbought and overly bullish indicators, but in this bear market I still prefer to play it safe.  I sure hate the idea of missing a rare rally, but I would rather wait until these indicators turn before making a move. That's all for today.  Thanks for reading.  See you back here tomorrow!