I'm guessing, and hoping, that those of you who follow the transactions missed that last minute cancellation I did of my transfer. If you did, you missed half of yesterday's losses by being 50% in the G fund. Since I did cancel it, I took the full brunt of the losses. It's interesting that the TSP.gov hasn't updated the fund share prices on their website as I write this Thursday night. Just as well. I'm not sure I want to see it.
So what now? The market is obviously struggling and the deeper the losses, the more likely the bull market may be in trouble. That doesn't mean we won't get a rally in the short term. The new AAII Sentiment Survey came out this morning and we are seeing bearish numbers only seen a few times a year. This tells me we are likely to see a rally some time in the next week. But that might be setting up a good selling point as it looks as if we are going back into a consolidation period, or trading range.
Here is the survey...
Chart provided courtesy of www.decisionpoint.com
The bearish percentage (red bar chart) hit 40% and the bullish percentage (green) is 34%. If you follow the "X"s and arrows I marked of other points where the numbers were this bearish you will see that these extreme bearish numbers usually lead to a rally. In the meantime there is a possibility that we will come down to that old 1165 breakout area on the S&P 500, which is also that 38.2% retracement. Hopefully it will happen first thing in the morning and will be followed by another reversal. I just want to get it over with. But it could take a few days. Not enough time to react so I'm staying put for now.
Like I said, I will use rallies to get back into defensive mode as things appear to be breaking down. I don't want to make the same mistake I made last summer by staying invested too long. The difference between now and then is that last summer I was almost certain we had a big rally just over the horizon which eventually did start in August. This time there are reason to remain cautious.
I want to show you one chart that was posted in 1997 by a company no longer around, as far as I know. This is a chart of the market but a model of an 8.6 year business cycle.
It is pretty impressive that it shows the last economic peak was in
mid-2000 and the drop bottoms out in late 2002. Our recent bear
market started in early 2000 and ended in early 2003. Pretty
close. January 2005 shows up as the next peak and we are seeing
the market show weakness. Does this mean the economy will pause
for the next 12 or 13 months (2005 - 2006.075)? I wouldn't use
this as a tell all indicator, but it is something to consider.
So the market could be in some trouble but don't be surprised to see
some decent rallies thrown in there. Timing the market is
difficult, particularly with our TSP delays in transactions. We
won't be right all the time. When we see a trend we will go with
it and that is when we will make our money (like we saw in the last half
of 2004). Right now the trend is questionable and it can be
frustrating trying get on the right track. Bobbing and weaving is
all we can do until we see a clear sign. The other choices are to
get invested and stop watching, or get out and wait for the "all's
clear" signal, whenever that will be.
That's all for today. Currently 50% C, 25% S, 25% I
fund. Have a good weekend.
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Prior Day's Market Comments (see archives on left for earlier comments)
We had a nice reversal followed by some late "smart money" buying.
I apologize for the quick switch yesterday.
After the early Intel rallied failed again and the Dow was down over 50
points, I thought, how long can this go on? I decided to move 50%
of my money to the G fund for Thursday. I sent out the email
alerts, updated the message board, made the transfer in my TSP account,
and went off to work. An hour later I got a peak at the market and
saw the Dow had gone back to green and realized we had just seen a nice
reversal day. I had to scurry out of my building and get to a PC
fast so I can get the word out to you. By the time I sent the
emails and updated the message board it was about 10 minutes before the
deadline. Plenty of time for me to cancel my transfer, which I
did. I hope you were able to see that. Not that it is a 100%
guarantee that the market will continue higher, but I wanted everyone to
be able to see what I did before the deadline so you can make a decision
for yourself.
The reversal started about an hour before the deadline. It is what
I call a "V" reversal as it is a fast turnaround and usually indicates a
capitulation (giving up) of the bulls - which is exactly what happened
to me. I gave up on any chance of a rally just before the rally
started. Oh how I love the psychological part of this game.
I am my own best contrarian indicator. I just have to learn to go
against myself, which really is tough to do.
Here is the intra-day chart of the S&P 500. #1 indicates where I
sent out the first email alert (my capitulation) and #2 is where I sent
out the cancellation.
As I mentioned, this is not a guarantee of a continued rally today but
that late buying tells me the "smart money" got in on it. That is
refreshing as we had been seeing selling during the last hour of trading
lately. The market is by no means out of the water just yet.
It still has to prove that this was just a pullback and not a change in
trend. I'm still watching cautiously.
Sometime this morning the results of the new AAII Investor Sentiment
Survey comes out. If I remember I will post the results on the
message board before I leave for work. I'm hoping we see close to
40% bearish sentiment.
Apple Computer announced some very strong earnings and guidance after
the close Wednesday which should help the Intel news. It's a
confirmation that earnings may be strong across the board and the market
really needed some good news.
Yesterday was another good lesson. Just when you think you can't
take the pain any longer, it's time to buy. That's comes just
after the sell signal you get when your barber starts giving you stock
tips.
That's all for today. Currently 50% C, 25% S, 25% I
fund. See you tomorrow.
Keep track of your 2005 returns. Downloading the 2005 returns calculator. Click here...
www.tsptalk.com/utilities.html.
Got questions? Visit our message board for answers.
Chart provided courtesy of
www.sentimentrader.com
---------------------------------------------------------------------------------------------------------------------
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Tom