Today's Comments (Short Term Outlook)                             Printer friendly

Due for a bounce, but yuck! Whether it was the jobs report, or if that was just an excuse, the selling on Friday turned a bad chart into a down right ugly chart.  If we don't see a quick turn around, we may be witnessing a breakdown of the longer-term S&P 500 chart, which is a very bad sign for 2008. The jobs report fell short of estimates coming in at 18,000 jobs vs. the 70,000 consensus.  We know those numbers could be completely revised by next month but for now, investors are concerned with the slowdown.  There does tend to be a reversal within a few days of any large sell-off caused by a negative surprise in the jobs report .     You can see below that the S&P 500 closed below the long-term support line which goes all the way back to the market bottom made in early 2003.  We could be seeing a year long head-and-shoulders pattern breaking down, which is typically a bearish formation.  I'll get into that another day this week.                                     Chart provided courtesy of www.decisionpoint.com  The good news is, in the short-term the market is very oversold, and as you can imagine, sentiment is getting very bearish.  That tends to lead to at least a temporary relief rally in the short-term.  The thing about oversold conditions is that they can stay oversold, although if your time frame is very short, which the TSP is trying to stop, you might be able to catch that rally.  If you are more of an intermediate-term timer, you may want to either stay on the sidelines until we see something positive on the charts, or sell any rallies if you are still in stocks.  Remember, the old broken support lines may act as resistance now.   The 10-day moving average of the NYSE ARMS Index moved below the 1.50 level, which can be a good long-term buy signal, although it is not a great short-term indicator.  The last time we saw 1.50, back in August, a two-month rally started after a week or two of more selling.                                     Chart provided courtesy of www.decisionpoint.com   If you remember, that reversal bottom made in mid-August was triggered by a surprise rate cut by the Fed.  With the next FOMC meeting not being held until January 29th and 30th, we could see the Fed step in again if things get any worse.  As a TSP participant, you'd have to be more anticipatory to catch something like that, rather than reactionary because of the transaction delay. As I write this Sunday night, I see that the futures are modestly higher.  That's not really the type of opening you want to see if we expect a reversal.  We had a taste of it on Friday, but the outright panic and capitulation have not shown up yet.  That mid-August morning was more like it.  Any positive open today could be met with selling. If we do see a rally in the next couple of days, don't fall too much in love with the bullish side.  This is an ugly market and it could burn you over and over trying to call a bottom.  I have made  that mistake quite often in downtrends. The TSP Talk Sentiment Survey System remains on a buy signal this week after last week's 35% bulls to 53% bears - 0.66 to 1 bulls to bears ratio.  This system is off to a terrible start in 2008 after a +21.32% gain in 2007, and a 27.98% gain in 2006.  The bad news is, if are following the system you are down 5% already this year.  The good news is, only 35% of you said you were bullish which means many of you may have missed the sell-off last week.                            That's all for today.   Griffin has posted his weekly Brief for us today, and if you missed it Friday, we have a new TSP Corner article from the FedSmith.  Enjoy!  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.