Today's Comments (Short Term Outlook)                             Printer friendly

Rags to riches The market put in a very nice reversal yesterday with the Dow turning an early 300+ point loss into a 300 point gain.  That's some serious volatility as we took out both Tuesday's low early on, and Tuesday's high by the close, making it an outside day. An outside day can indicate that a reversal is immanent.  Not always, but it is a generally bullish pattern when we close near the highs of the day.  I am not ready to call the bear market dead, but this is a good start.                                      Chart provided courtesy of www.decisionpoint.com  Bear markets can have within them some very serious rallies.  During the nasty bear market of 2000-2002, the S&P 500 saw three separate rallies of about 20% while remaining in a downtrend.  So, the bear has not waived a white flag just yet.  Respect the downtrend but expect some explosive rallies as we saw yesterday.  Once the trend changes back to up, that will give us a better risk/reward entry point.  As I mentioned yesterday we are looking for a few things:  A big move back over the neckline on very high volume.  A market that does not sell-off, but rather continues to rally once it becomes overbought.  A test of the lows that holds and reverses up.  I'm not sure yesterday qualifies as a successful test. We did see some extremes in some indicators, such as the equity put/call ratio and the AAII Sentiment Survey, but we want to see how the market reacts when it becomes overbought.  We're not even close yet.                                    Chart provided courtesy of www.decisionpoint.com  That's all I have time for today, which is probably a good thing.  I don't want to over analyze the  reversal this early.  We need to see some follow through on high volume for confirmation.  The smart money indicators are still tentative, showing they are not exactly jumping on the weakness just yet.  For the short-term, it could be dangerous, but there may be some money to be made if you are nimble. That's all for today.  See you 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.