Today's Comments (Short Term Outlook)                             Printer friendly

Options week is welcome The market headed into Friday looking to hold on to the week's gains after a string of losing weeks, but the sell-off took care of that.  That's three weeks in a row, and 4 of the last 5 that have ended in the red.  Not a good start to 2008. The last positive week for the S&P 500 was options expiration week in December.  Perhaps that is a good sign as today starts January's options expiration week.  Except for the triple bottom that has held so far, this chart is not looking very encouraging for the intermediate-term.  Those looking for a short-term move higher may be interested in buying here, but the current trend in this chart tells us that we should still remain cautious until the technical picture improves.                                      Chart provided courtesy of www.decisionpoint.com  The NYSE overbought/oversold indicator is sitting just south of neutral (-143), which is somewhat of a surprise given the negativity in the indices, but also notice the converging pattern forming on the chart (middle graph below.)  There's nothing too significant about this event except that it throws a little more uncertainty at us.  Will this chart breakdown getting us oversold again and giving us a chance to buy at a lower price, or can the market rally from this neutral point?                                        Chart provided courtesy of www.decisionpoint.com  The pink bordered graph above is the 10-day moving average of the OEX put/call ratio.  You can see it is sitting near the 1.00 level which tells us that the "smart money" is getting more exposure to the long side of the market (betting it goes higher).  It's been over two years since we hit this level.  This is a rather short-term indicator (weeks) so the smart money appears to be expecting some sort of rally here.  Again, it could be a setting up for a positive options expiration week.  Last week's TSP Talk Sentiment Survey came in with a  0.65 to 1 bulls (34%) to bears (52%) ratio keeping it on a buy signal and a 100% S-fund allocation.  This system has been the underperformer so far this year after two very successful years.  For those of you who have followed this system for any length of time, you know this type of action does happen - where it is wrong for a couple of weeks in a row.  Perhaps it is the changing of the market environment, but I doubt it.  Using sentiment as a contrarian indicator has been a very good way to play markets for many years. Bottom line - The market is in trouble from a technical standpoint but due for some relief.  I was hoping for a little panic sell-off early this week to set up a reversal day to the upside.  I'm a little disappointed to see the futures up (Sunday night) but that could change.  Another big sell-off could be just what we need to set up a rally into the Fed's next FOMC meeting on January 29th and 30th. That's all for today.  See you back here 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.