Today's Comments (Short Term Outlook)                             Printer friendly

Sentiment, seasonality, and data Stocks rallied strongly again on Thursday, and surged late on positive news for some subprime loan borrowers to help them avoid foreclosure.  Once again the news follows the market, and the sentiment surveys led the market. Today we have a jobs reports and of course next week a big FOMC meeting, both of which will be market movers.  The jobs report could be a tell for the interest rate decision Tuesday.  Investors seem to be embracing the positive economic data, even though positive economic data could be a reason to keep interest rates where they are, but the credit issues and low T-Note yields will keep the pressure on the Fed to cut.  It's all good.  The only question will be whether or not we get a 25 basis point cut (0.25%) or a 50 basis point cut (0.50%).  A very weak jobs report won't be good news, but it will get the Fed leaning more towards the 0.50% cut. The TSP Talk Sentiment Survey System will actually move to a sell signal for next week as we had a huge shift in sentiment in the last week.  The bulls (69%) to bears (17%) ratio was over 4 to 1.  It's been a year since we have seen anything this bullish (bearish for stocks).  That's the bad news. The good news is that our survey system tends to be a little early.  Also, the AAII Investor Sentiment Survey is not overly bullish at all, although the jump from the 0.50 to 1, to the 1 to 1 ratio has had a tendency to put a temporary halt to a rally, but longer-term market tops don't tend to happen until we see readings more in the 2 to 1 bulls to bears ratio.  You can see below that you can get these 2 to 3 day pullbacks when sentiment jumps from under 1 to 1 to above.  But the longer trend continues up until you get closer to 2 to 1.                                        Chart provided courtesy of www.decisionpoint.com This leads me to believe that we could get 2 or 3 down days within the next week.  Not a big problem at all yet. Today is the 5th trading day in December so if seasonality is going to play a roll this month, and we are off to a good start, we could see that pullback in the next week or two, confirming the above sentiment data.                                 Chart provided courtesy of www.sentimentrader.com I never use seasonality as a primary indicator, but it is interesting that the only positive day between trading day 5 and 11 in December is day 7, which happens to be Tuesday or the day the Fed will cut rates.  But the wave of weakness is followed by one of the strongest seasonal data stretches of the year. I want to give another plug to the new organization that has been started to help the TSP participants have more input into what the Thrift Saving Plan does, www.tspshareholder.org.  They have started a petition and I would encourage all you to help them out, even if you don't care about the two interfund transfer limit they are trying to impose.  The issue goes beyond the interfund transfer limit.  It makes a statement about how we, the participants, are not being represented when it comes to making changes to the plan.  I'm sure the TSP is trying to do what they believe is the best for everyone, but maybe they should hear from us first before acting.  You can sign TSP Shareholder.org's petition on this site.  Please pass this along to your co-workers.  That's all for today.  Have a great weekend. 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.