Today's Comments (Short Term Outlook)                             Printer friendly

The game has changed When yesterday's morning rally failed at the neckline (old support becoming resistance) I knew it was going to get ugly.  But I was hoping the pre-holiday and options week trading would keep things afloat.  Of course, they did not. We could very well see an oversold rally at any time but this convincing break of the triple bottom is not a good sign for the intermediate-term.  And the longer-term picture has also been compromised with the break in the bullish trend.                                      Chart provided courtesy of www.decisionpoint.com  You never know what will happen.  The Fed could step in and give the market some relief, but the technical damage in the charts has to be respected.  At this point we have to assume that the trend is down, and any rally will be short-lived unless some fundamental change occurs. We talked for months about the clues we were seeing with the soaring price of oil, gold, commodities in general, the sinking dollar, housing market and interest rates.  The writing was on the wall but many of us were in disbelief given the 4.5 years of a bull market with not so much as a 10% correction.  I don't want to predict what will happen next, but let's just say it will either be very good or very bad.  We will either see a strong snap back rally to at least the old support line, or we will see a complete melt down now that support is nowhere in site.  A market crash is a rare event but when they do come, they usually manifest in an environment such as this.  I am not saying the market is going to crash, but I want to illustrate my point.  In 1987 the S&P was down about 10% when it started to break through support.  By the time it moved below the 200-day moving average and a 16% decline, many thought it was a good buying opportunity.  The next day the market dropped 24% in one day.                                     Chart provided courtesy of www.decisionpoint.com  Things have changed since then but the point is that market crashes don't come from market tops.  They start after a lot of damage has already been done.  We are not out of the woods yet. The odds say we don't crash.  The market is oversold but don't you think it may be worth waiting to see if the chart improves before trying to call a bottom?  I seem to get burned every time I try.  The futures are positive as I write this, but they were strong Wednesday night as well.  Panic is near and we will get a buying opportunity.  But whether that is here or another 10% lower, i don't know. That's all for today.  Have a great holiday weekend and we'll see you back here on Tuesday. 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.