Market Comments
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Market Comments |
| Today's Comments (Short Term Outlook) |
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What are the more savvy investors doing? As of today, I still don't believe we are starting another leg down of a bear market. The market is certainly telling us something but it is more likely going to be a consolidation period as we saw in the first half of 2004. But the market is humbling as I have mentioned many times. Last January (2004) the market was coming off a huge 2003 market performance. The indicators were telling me the market needed a rest so I spent the entire month of January in the G fund and the indices continued to skyrocket for three more weeks leaving me behind. I went into the G fund at the top of that box on the left and you can see the strength continued. 
Chart provided courtesy of www.decisionpoint.com Even after a couple of sell offs the market continued to bounce right back before giving in to the consolidation period which didn't officially end until early November. My point here is that this year we had almost identical readings. The market and my indicators were telling me things were overbought but I did not want to make the same mistake as I did last year. Those first couple of days in January told me that the indicators may be correct this time but I thought that we were likely to get an after-shock bounce up as we saw several times early last year. Well, I'm still humbly waiting. So what are the savvy investors thinking? We know the AAII Investor Sentiment Survey showed the general investors are getting very bearish as the percentage I showed last week was up near 40% bearish, a near 1 to 1 ratio with those bullish, which is usually a sign that the market is ready to rally. But the Fearless Forecast Sentiment is a poll of a small group of more informed, technically oriented group of message board participants. Their bullish percent is now over 60%. The bearish reading is 31%. This is not a contrarian indicator as with the AAII survey. 62% is the most bullish they have been in over 12 months. I tend to pay attention to what they are saying.    Chart provided courtesy of www.decisionpoint.com Here is one more peek at the difference between the "smart money" and the "dumb money". The equity put/call ratio tracks all options (puts and calls) bought by all investors. When puts start outnumbering calls it means the "dumb money" is getting bearish (a good sign for the market). OEX options traders, who track the S&P 100, are considered a more savvy bunch. They are not to be used as contrarians but rather ones to pay attention to. This chart will show you the divergence of the smart vs. dumb money as the OEX options traders are buying calls (betting the market is going to go up), while the equity options traders (less savvy folks) are buying puts (betting the market is going to go down from here) and this type of divergence is typical at market tops and bottoms.  Chart provided courtesy of www.decisionpoint.com Bottom line, I'm hating that I have been stuck in the market during most of this drop. But the bearishness I am seeing from everything I have been reading is telling me we have a rally coming soon. I won't say the bull market will continue, but it tells me if I am going to either get out of the market, or play this consolidation, there will be a better time to sell in the days and weeks ahead. I don't know what will happen. I can only play the odds based on what I am seeing. One change I will make right now is to get out of the I fund while the dollar appears to be making an attempt to continue its rally. I make a transfer this morning which will be effective Tuesday to 50% C, 50% S fund. 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. |