Dip buyers turned into rally sellers

A big morning turned into a mixed day for stocks yesterday.  The Dow salvaged a modest gain but the tech heavy Nasdaq saw a major reversal before the day was done. 

Yesterday we talked about the deadline making it tough to make short term decisions.  If you trade on emotions rather than indicators, the early morning strength may have enticed you to jump into the stocks funds.  I don't know what will happen today but I'm guessing that anyone who did get in may not be too excited about that decision now.  The only benefit is that the late sell off bought you into the funds at a lower price than you probably thought you'd get.

I wanted to follow up on the "gap" formation I talked about yesterday:

I pointed out that the chart of the Nasdaq 100 had an open gap between1676 and 1684 and that gaps usually get filled.  It became a target for an upward move.  The gap was almost completely filled during the morning rally but the Nasdaq 100 fell apart before the day was done.  The 50-day moving average also acted as resistance.

                                 Chart provided courtesy of www.decisionpoint.com

Let's take a quick look at the AAII Investor Sentiment Survey.  The bearish percentage this week was 35%.  That is getting on the high side but 40% and higher seems to be the magic number. 


                                   Chart provided courtesy of www.decisionpoint.com

40% tends to be a good indicator that we are closing in on a playable bottom.  That number could be closer to 50% depending on how slowly the market moves down.  Quick sharp drops tend to get people thinking about buying the dips.  Slow, long lasting drops can be demoralizing to bulls and can bring sentiment down to the 50% range.  When people are still thinking about buying the dips, be on the look out for more weakness.

If you are a TSP Timing Newsletter subscriber and you didn't see, there was a midweek update released last night.

That's all for today.  Currently 100% G fund.  Thanks for reading.  Have a great weekend.
 

---

RevShark's TSP Timing Newsletter is now available.  You can go to www.tspalk.com/members to sign up.  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 go over charts of each fund with a technical breakdown of each by RevShark.  The subscription now includes a midweek updates as needed.

The subscription price will be $19.95/month which will include 4 to 5 weekly newsletters each month, plus the midweek updates as needed.  The newsletter will be in PDF format so you will need an Adobe Reader (Download it free here.)

Still have questions about the TSP Timing Newsletter?  Click here.