Today's Comments (Short Term Outlook)                             Printer friendly

Rally to resistance Another volatile day for stocks yesterday, but in the end, Ben Bernanke painted a pretty grim picture for the economy, all but promising to aggressively cut rates to protect growth.  Investors liked what they heard and we saw another strong rally into the close. Yesterday I mentioned the three main areas of resistance I am watching and point A turned out to be where the rally came to rest.  Like Tuesday and Wednesday of this week, the S&P 500 was able to move over the old support line, but it still has not closed above it since the breach last Friday.                                     Chart provided courtesy of www.decisionpoint.com  Not surprisingly, the TSP Talk Sentiment Survey came in overly bearish again keeping the system is the S fund for next week.  The S fund finally had a good day yesterday, but as long as the potential for a recession continues, we may want to reconsider the small cap fund for the system and consider the C fund.  Small caps don't tend do well in recessionary periods. The 0.65 to 1 bulls (34%) to bears (52%) ratio is deep into the sentiment system's buy zone.                          I am going to cut this short tonight as I was out most of the evening.  I did want to make a quick follow up on yesterday's discussion about the I-fund fair valuations.  Yesterday the EAFE closed down 0.71%.  I had talked about the buy and holders getting the benefit of Wednesday's lack of fair value.  A benefit they don't even realize that they get from the frequent traders when Barclay's doesn't follow their own fair value formulas.                   The I fund paid 0.07 (7 cents, or +0.29%) yesterday despite the 0.71% loss in the index.   The folks who moved out of the I fund COB Wednesday (the ebbchart active system) basically had their gains handed over to the folks who were in the I fund on Thursday (buy and holders, L-fund participants, etc.)  That can be confusing.  Just know it's happening. See the explanation below.  Basically, the buy and holders should not be complaining about transaction fees.  They are probably making more money on fair value adjustments then they lose with fees. Look for the rally to run out of steam today or early next week.  Too much resistance.  But that could set up a panic type sell-off that may give us a better technical buying opportunity. 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.