It's tough to have patience but this is what we expected.

It is tough to sit on the sidelines when the Dow is up 100 points but I have to remind myself that we expected this.  As I wrote in Monday's comments just after the 200 point loss, we knew that the market tended to be higher ten days after that situation...

...10 days after action which we have seen this past week [1/17 - 1/20], higher prices are likely - that is 2.5 stocks rose for every one stock that was down on Thursday and on Friday 2.5 stocks were down for every one stock that was up, all while the S&P was within 1% of new 52-week high.  But that reaction tends to be short lived and lower prices were likely after those 10 days.  - 1/24/06

But a 100 point gain is a 100 point gain and it paid off if you were willing to take the risk...

If you want to try to pick up a few points in stocks  you could get in now with the intent to get out again if we get a rally. - 1/24/06

It all sounds great but don't forget the Dow was in negative territory for the year going into yesterday.  It sure seemed like the market was doing better than that. 

I'll show you again the scenario I am anticipating.  Like in March/April and September/October 2005, a rally off of a decline led to one more strong push down.  Both selloffs made their way below the 200-day moving average (blue line) before bottoming out.


                                  Chart provided courtesy of www.decisionpoint.com

Nothing has happened yet to change my mind.  If the timeframe is similar to the other instances, which may or may not happen this time, we could have another week of sideways to higher action in stocks before the selling commences.

Bonds took another hit on Thursday.  I have never relied on my instincts because well, they aren't that good.  The reason I use indicators so much rather than "gut" as some do for stocks, is because I do not trust my instincts.  But when I mentioned on Wednesday morning that I thought bonds were starting to look tired, I should probably have acted.  It would have saved me some money.  I am ready to make the move out of bonds so look for an email alert Friday.  I hope Friday gives us back some of those losses before I move out, but I think I will take the guaranteed penny gain in the G fund for Monday (or Tuesday).

Someone on our message board posted an article that talked about what Ralph Acampora (who made a name for himself will his very bullish predictions for the market in the mid-90's) thought about the market for 2006 and beyond.  I don't consider myself a follower of Acampora as I haven't even heard his name mentioned for some time, but look what he had to say:

Acampora says his long-term outlook is still bullish. In fact, his advice to investors is to get ready for a major buying opportunity. "If we are correct, this selloff will set the stage for a major market bottom--a classic four-year low," he says. "Then, I think, the market has a gangbuster move going into the latter part of 2006, all of 2007, and probably 2008."

Does this sound familiar?  I know this call sounds silly now considering what the market has done this year but I try to keep my emotions out of it and just follow the indicators.  I'm seeing the same thing.  Maybe not to the same degree but a strong rally is going to need more fuel. 

Microsoft reported strong earnings after the close yesterday and that should help the market see another positive open Friday.  I wouldn't be surprised to see 1279 - 1280 on the S&P 500 some time during the day, but that could mark at least a temporary resistance point.  

This weekend we will make the first issue of RevShark's TSP Timing Newsletter available.  I will add some links on a couple of pages that will lead to a member's page.  That is where you can sign up to become a member and to gain access to the 14 day free trial. 

TSP Timing is a weekly newsletter giving subscribers a target allocation determined by professional hedge fund manager James 'RevShark' DePorre.   Subscribers will navigate the financial seas along side the Rev while he manages millions of dollars for private investors.  Each week he will highlight TSP funds and a target allocation he believes will provide the best investment potential.  The newsletters will will show a chart of each fund with a technical breakdown of each by RevShark.

Once the trial period is over, the regular subscription price will be $19.95/month which will include 4 to 5 weekly newsletters each month.  The newsletter will be in PDF format so you will need an Adobe Reader (Download it free here.)

That’s all for today.  Currently 100% F but looking to change.   Thanks for reading.  Have a great weekend!