Today's Comments (Short Term Outlook)                             Printer friendly

Finally, some relief Yesterday's reversal was embraced by Wall Street as it seemed as if everyone was waiting for  someone else step up and buy first.  Once they did, the bids came in and we saw a nice rally. The larger stocks took off first and the small-caps may have some catching up to do.  But regardless of how good this relief rally is, we have to remain on our toes because it may not last too long. The three main areas of resistance I am watching would be the areas marked A, B and C.                                      Chart provided courtesy of www.decisionpoint.com  The other concern is the triple bottom, marked 1, 2 and 3 above.  The concern is that "they" say there is no such thing as a triple bottom.  There are "V" bottoms, "W" bottoms (also called double bottoms)  but you rarely see triple bottoms because they "never" hold.  Of course when you hear the word, never, that's when it will happen.  But take that into consideration when trying to call a bottom here. We could see a nice rally in the next few days, but there continues to be technical damage to deal with and again, it could be an invitation to sell higher if you still hold stock funds.  The rallies could be sold as fast as they manifest. I have shown you this chart before.  It is SentimenTrader.com's culmination of their sentiment indicators and when the smart money level is over 60%, and at the same time the dumb money is below the 40% level, you have a buy signal.  The current reading is smart money 67%, and the dumb money 39%.  This could be a good long-term buy signal but you can see below that the 60/40 levels can get more extreme, as they did during the prior two pullbacks this year.  So, if we see 70/30, I would be more inclined to jump into a falling market.                                   Chart provided courtesy of www.sentimentrader.com With the TSP holding our accounts hostage we have to be more selective in our buy and sell points.  If I were not concerned with this I would go ahead and get into the stock funds for a couple of days to catch an oversold rally.  But I am concerned we may get a better chance later in the month.  Speaking of the trading limits, something happened yesterday that was brought to our attention by the folks at TSPsharholder.org last week.  Here is the article (Dollars and Sense).  Here's what happened: The Ebbchart System, now gives two signals: The original fast paced trading signal, and the new less active signal for the TSP funds to try to calm down the trading. Yesterday the active system was in the I-fund.  As you can see in the share prices near the top of the page, the I-fund was up .07 (7 cents) yesterday.  With yesterday's strong late rally in U.S. stocks, you would expect Barclay's to add a good size fair value to the price of the I-fund shares. From the TSP.gov website: Participants have asked why, on some days, the change in the I Fund share price reported by the TSP does not match the change reported for the Morgan Stanley EAFE (Europe, Australasia, Far East) index, which the I Fund tracks. This happens when the Board's investment manager, Barclays Global Investors (BGI) reprices its EAFE Equity Index Fund, in which the TSP invests, after the close of the foreign markets. This process, known as "fair valuation" or "fair value pricing" occurs when there are large U.S. market or currency movements between the time the foreign markets close and 4:00 p.m. eastern time, when BGI's share prices are determined. But they did not add a fair value to the price yesterday.  Here's where the conspiracy theory comes in.  We suspect that the TSP pays some attention to what goes on here.  For one thing, the Executive Director is on our email alert list.  The ebbchart system, which was a major reason for the change in transfer limits, will be in the G-fund today after being in the I-fund yesterday.  Guess when the fair value will be paid?  Probably today - when those following the system are back in the G-fund.  So, who gets this fair value for those traders' shares?  The buy and holders investors, any L-Fund investors, or anyone else who happens to be in the I-fund.  The ebbchart system subscribers will get none of it, even though they predicted the rally yesterday. This has happened many times in the past so if you ever hear a buy and hold or L-fund investor complaining about frequent traders eating up their account balances because they think they are paying our transaction fees, ask them if they are aware of the millions that were generated in their account because of these fair valuation adjustments.  I am sure they are completely unaware of it, and the TSP folks proposing the transfer limitations may not even understand it.  I don't want to say that it is being done intentionally, and there may be days when it goes the other way.  But there seems to be a tenancy here and yesterday's fair value should have been a gim'me.  This side of the story is not being told to us.   Here are some comments from the folks at TSPshareholder.org: "In October, the last month in which they showed data, the month's fees for ALL $ 4 BILLION traded was just one million, three hundred sixteen thousand, seven hundred eighty six dollars. ($1,316,786). "And for that, the "Churning" allowed Barclays to shave off ONE HUNDRED FIFTY THREE MILLION, THREE HUNDRED THOUSAND DOLLARS- ( $153.3 million) in "Fair Value" pennies taken away from those who trade, and given to those to buy and hold accounts. "Net gain for buy-and-holders- about $151 million after ALL expenses were taken into account." They have more data coming out in their next newsletter that will also get your attention.  You can sign up for their newsletters on their web page.  I want to thank them for all of their efforts.  Anyway, look for possible follow-through to the upside in stocks in the next couple of days, but be careful.  We may not have seen the end of the selling just yet.  The rallies could be very temporary.                            That's all for today.   See you tomorrow. 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