Today's Comments (Short Term Outlook)                             Printer friendly

It's getting tricky The market continued to digest the recent gains as stocks were down modestly across the board again yesterday.  The charts aren't looking great here, but it may be more tricky than that. Whenever you enter the holidays and particularly December, you have to consider the strong seasonal bias that permeates through the stock market.  It's not a slam dunk but fighting it over the years hasn't paid off too often.  But new the credit crunch issues seem to pop up daily and spook investors back into selling mode.  I had mentioned that I could see a pullback in the S&P 500 to fill the gap that was left open late last month - that would be in the neighborhood of 1430.  Looking at the chart, you can see the topping action of the recent gains as the 50-day moving average seems to have acted as resistance.                                        Chart provided courtesy of www.decisionpoint.com A lot of very smart people are looking for a recession and another leg down in stocks, and I won't rule that out as a possibility.  But there are also a lot of very smart people who are looking for a strong move up to close out the year. One of my favorite short to intermediate-term indicators is the 10-day moving average of the OEX put/call ratio.  This is a "smart money" indicator, and this smart money is now more bullish than any time all year.  You'd have to go back to the summer of 2006 to see a more bullish reading.  Looking back at the last few times the indicator went over 1.20, we saw at least a couple of weeks of strong action in the stock market.  The last two days, which have been down but on light volume, could be a head fake to get "the herd", or dumb money, back into bearish mode while the smart money hopes to ride the next wave higher.  But after the holidays, we will have to play it by ear as the economic negativity unfolds.                                        Chart provided courtesy of www.decisionpoint.com The jobs report this Friday, and the Fed meeting next week, could set the tone for the rest of the year, but then there's that post jobs report / Fed reversal trend so it will not be easy.  The market could be tricky for the next three or four weeks.  The forces will be battling from both ends of the court.  We have negative credit data surfacing daily, the jobs report, the Fed meeting with a probable rate cut, and a strong holiday bias to deal with.  Because of this, I expect volatility to continue.  The TSP would like us all to close our eyes and endure this volatility in a buy and hold allocation, but I have a hard time accepting that.  There is money to be made, but also assets to protect, and the situation could change weekly or even daily.  Some members of our message board have recently created a organization and website to act as sort of a liaison between the TSP and its participants.  To keep yourself posted on the latest information and what you can do to help, please go to www.TSPshareholder.org.  TSP Talk is not directly associated with the group by we do support them. That's all for today.   See you tomorrow. Have questions?  Visit our message board for answers.  Would you like to be on our email alert list?  We will send you an email when there is a change to our asset allocation or market outlook.  Your email address will never be given out.  Read our privacy policy.  By signing up you agree to the TSP Talk Terms of Service.  More details below **. Are you bullish or bearish?  Join the Weekly Sentiment Survey. Like what you're reading?  Tell a Friend about us.