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Big impressive day Thursday. What's happening?
When the market is overbought it can still try to reach for the stars. The odds get higher that we'll get a pullback but the bullish sentiment is soaring and it can cause a bit of irrational behavior at market extremes.
As I have said before, the market doesn't look at the indicators. The indicators look at the market. So the market is going to do what it is going to do and the indicators tell us the higher percentage play. As the market reaches the point of exhaustion, the indicators may say to sell but we still have to wait for the exhaustion peak for a turnaround. Take a look at the chart of the Dow below for some examples of where the market was extended, pulled back a bit, only to be bought again. Those who buy the last wave get hurt the most.
Point A shows the resting point after a big rally. After a brief rest the Dow resumed higher before it peaked and pulled back. Point B shows a similar situation; Rally, small pullback, peak, larger pullback. It seems as if we are now experiencing a small pullback which could lead to one more exhaustion move above 11,000, just to make the herd happy, then the more severe pullback may occur.
Chart provided courtesy of www.decisionpoint.com
Who knows what will really happen? We could go straight down from here for all I know. We could move well over 11,000. The thing is the indicators tell us what the higher odds play will be. And when the market is well into overbought territory, short term market timers should consider getting defensive. That is unless you can be very nimble, which is tough for us TSP folks. The big moves up and down make it tough to know which way the wind will blow next. But like a rubber band stretched too tightly, eventually you will see a snap back.
The new AAII Investor's Sentiment Survey came out and the bullish percentage went from 57% last week to 52% this week, and those bearish went from 15% to 23%. But remember, this poll was taken on Wednesday, the day the Dow was down 80 points. Thursday's big rally surely brought those numbers closer to last week's. Either way, when you have a ratio of 2 to 1 bulls to bears or higher, it is a yellow flag for the psychology leg.
I am still expecting a pullback but a move toward 11,000 is not out of the question. It seems to be a psychological goal that may have to be taken out before the exhale.
To follow up on bonds; The 30-year bond has worn down rather than rally from the recent pullback. It still looks a bit too premature to jump into the F fund.
That's all for today. Currently 100% G fund. Thanks for reading. Have a great weekend!
When the market is overbought it can still try to reach for the stars. The odds get higher that we'll get a pullback but the bullish sentiment is soaring and it can cause a bit of irrational behavior at market extremes.
As I have said before, the market doesn't look at the indicators. The indicators look at the market. So the market is going to do what it is going to do and the indicators tell us the higher percentage play. As the market reaches the point of exhaustion, the indicators may say to sell but we still have to wait for the exhaustion peak for a turnaround. Take a look at the chart of the Dow below for some examples of where the market was extended, pulled back a bit, only to be bought again. Those who buy the last wave get hurt the most.
Point A shows the resting point after a big rally. After a brief rest the Dow resumed higher before it peaked and pulled back. Point B shows a similar situation; Rally, small pullback, peak, larger pullback. It seems as if we are now experiencing a small pullback which could lead to one more exhaustion move above 11,000, just to make the herd happy, then the more severe pullback may occur.
Chart provided courtesy of www.decisionpoint.com
Who knows what will really happen? We could go straight down from here for all I know. We could move well over 11,000. The thing is the indicators tell us what the higher odds play will be. And when the market is well into overbought territory, short term market timers should consider getting defensive. That is unless you can be very nimble, which is tough for us TSP folks. The big moves up and down make it tough to know which way the wind will blow next. But like a rubber band stretched too tightly, eventually you will see a snap back.
The new AAII Investor's Sentiment Survey came out and the bullish percentage went from 57% last week to 52% this week, and those bearish went from 15% to 23%. But remember, this poll was taken on Wednesday, the day the Dow was down 80 points. Thursday's big rally surely brought those numbers closer to last week's. Either way, when you have a ratio of 2 to 1 bulls to bears or higher, it is a yellow flag for the psychology leg.
I am still expecting a pullback but a move toward 11,000 is not out of the question. It seems to be a psychological goal that may have to be taken out before the exhale.
To follow up on bonds; The 30-year bond has worn down rather than rally from the recent pullback. It still looks a bit too premature to jump into the F fund.
That's all for today. Currently 100% G fund. Thanks for reading. Have a great weekend!
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