Ebay's weaker than expected earnings report was greeted with boos.  The market did not like it one bit.  It didn't particularly like Intel and Yahoo's good earnings reports either.  What is going to turn this market around?  Fear.

I mentioned yesterday that there needs to be a giving up attitude before things will turned.  I figured a move to the 1175 to 1165 area may do that.  yesterday the S&P 500 closed at 1175 so we are at the high end of that range.  I see a potential 10 point drop next.  For those of us still invested, and who aren't too worried about a complete collapse in the market, should probably wait it out at this point.  I don't want that to sound like advice so I'll speak for myself.  If I were to jump out today, which will be effective Monday, I risk seeing a late day surge which may carryover until Monday - where I'd be on the sidelines.  The only thing worse than being in the market when it is going down, is being in when it is going down, then missing the rebound.

This is not fun but it is currently just a healthy pullback.  I won't say we are in a screaming bull market anymore, but a 38.2% retracement of the prior rally since late October is not a shocking event.

The AAII Investors Sentiment Survey came out and while the bullish percent did not go up (which is good), the bearish went down from 40% to 34%.  I would have rather seen it stay above 40%.  But I guarantee Wednesday's late action and yesterday's sell off brought that number back near 40%.  The survey cut off is something like Wednesday at noon.  When you get to 40% and 50% bears you would say there is fear in the market and, like I said, that is what you want to see to get a turnaround.

sentimentrader.com shows us this chart of Rydex Sector sentiment. 

                
                         Chart provided courtesy of www.sentimentrader.com

Basically it tells us that once 20% or fewer sectors show assets greater than their 50-day average, the S&P 500 returned an average of 3.5% over the next 30 days, with every occurrence being positive.  After 90 days, every one still showed a positive return, which had climbed to nearly 7% on average.  This is assuming we are still in a bull market.

Our TSP is just not flexible enough to play the daily swings.  We have to look at a little bit longer like weeks.  So, the next few days could be rough for those of us still invested in stocks.  If we don't get a bounce in the next couple of days it could be an ominous sign for the longer term for the market.  Even still markets don't go straight up, or straight down.  It breathes in and out, or up and down.  I think another 1 to 3% is a fair estimate of potential downside action.  That could happen today or next week, we don't know, which is why it is difficult to step aside right now. 

That's all for today.  Currently 50% C, 25% S, 25% I fund.   Have a good weekend.

Keep track of your 2005 returns.  Downloading the 2005 returns calculator.  Click here... www.tsptalk.com/utilities.html.