Today's Comments (Short Term Outlook)                             Printer friendly

Happy New Year!  Fresh start The indices ended a bumpy 2007 on the positive side and, although the TSP stock funds were all negative in November and December, all of the funds ended the year with fair gains.   2007   Totals G Fund: +4.87% F Fund: +7.09% C Fund: +5.54% S Fund: +5.49% I  Fund: +11.43% The F fund was the surprise of the bunch, beating both the C fund and the S stock funds.  Like 2006, the I-fund was again helped by a weakening dollar in 2007. We now enter 2008 and I have about as much uncertainty as I have ever had going into a new year.  In the short-term, we have a very strong positive bias for this first week.  But the continued concerns over the credit situation permeates every one of my theories looking out further, including the non-fundamental approach of technical analysis. Will we continue to be hit with news of the effects of the credit, mortgage, housing issues?  How widespread is the damage?  Will it affect other industries?  How much will earnings be affected?  Will the economy slow down enough to actually cause a recession?  Will it matter to stocks?  Will inflationary concerns keep the Fed from being able to continue to cut rates? I don't know the answers to any of those questions, and even if I did, I don't know how it would affect the stock market.  If you have been a long time member of our message board, you would have seen others talking about the credit / mortgage / sub-prime issues for the past couple of years, but for some reason the market did not seem to react to it until this past summer.  That goes against my philosophy that the market knows things and reacts well before we do, as the market in fact did very well as it took 4 1/2 years for S&P 500 to experience a 10% correction after the bear market of 2000-2002, even though this credit crunch has been lingering for years. In the short-term, the historical data tells us that when the last week in December is negative, the chances of a rebound during the first week of January are quite high.                                                                     Chart provided courtesy of www.sentimentrader.com You can see that, going back 20 years, the last 10 instances have all shown a beginning-of-year rebound.  That's a good sign for the remainder of this week.  Seasonality is rarely a primary indicator as we saw last week, normally the most positive week of the year, and it ended down. I am in stocks today trying to take advantage of a potential rebound, but until the technical picture improves, I plan to sell any rallies, overbought condition or resistance areas.  The chart below is worrisome.  We are seeing a series of lower highs, but the higher lows do keep things interesting.  The direction of the breakout of this pennant formation will be the big key going forward.  The S&P is now trading below all three major moving averages (20, 50 and 200).                                     Chart provided courtesy of www.decisionpoint.com I am not seeing any edge in the overbought/oversold indicator or the 10-day moving average of the OEX put/call ratio (smart money), although the daily OEX put/call ratio is showing some optimism from the smart money for the very short-term (days).  That could be them playing this strong seasonal bias on the long side (betting stocks move higher). I will be updating the longer-term commentary in the next few days but I did post a new more defensive allocation on Monday, for our hypothetical inactive / buy and hold type account on that page. A quick note about the proposed TSP transfer limits.  Did you notice that this proposal was originally announced during the quiet Thanksgiving week, when congress was out?  Then they put out the Federal Register Notice during the week between Christmas and New years.  They sure seem to be trying to sneak this change in under the radar.  Don't let them do it.  Tell anyone who will listen.  Act now!  That's all for today.  I'll be back here tomorrow. Please Read!  Participants Choices of TSP Funds. Send them a fax!  Their Fax number is (202) 942-1676.  You can use www.faxzero.com. It's free.  If you wish, you can use this well written letter as a template, or others like it posted in that forum (use that link).  Is your union aware of this?  Let them know how you feel too!  Please act now before it's too late!  More info from www.tspshareholder.org. 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.