Today's Comments (Short Term Outlook)                             Printer friendly

Looking for a sharp short-term move Stocks moved up nicely yesterday but we really did not break out of the recent tight trading range we have been in the last several days.  Yesterday's highs and lows were almost identical to Friday's; which was also similar to last Wednesday and Thursday's range.  This makes me believe we could see a big move (maybe 5%) in one direction or the other - but I wish I knew which way.  We saw some similar quiet periods during this correction, and some broke to the upside, and others down.  The common thread between them is that whichever way it broke, within a week or so, it reversed.                                       Chart provided courtesy of www.decisionpoint.com  This tells me we could probably get a good buying setup if we do see a sharp sell-off in the coming days.  If instead we get a sharp rally out of this trading range, staying on the sidelines might be the better move, unless you can get in quick.  That will be a tougher play. The smart money indicator - 10-day moving average of the OEX put/call ratio - has been in a steady rising trend since the market started to correct from the October highs.  That is common for these smart money indicators.  The smart money slowly buys into a declining market - the opposite of what the dumb money does.  By the time the market bottoms, the smart money is most optimistic - again, the opposite of the dumb money. Right now the current 10-day moving average reading is below 1.00 (above on the chart) and the trend is also moving that way.  This tells me we could be nearing a decent intermediate-term buy point.                                       Chart provided courtesy of www.decisionpoint.com  The sentimentrader.com's smart/dumb money confidence indicator, which is compilation of many sentiment-type indicators, is getting bullish for stocks.  When the smart money (green line) is above 60% and the dumb money (red line) is below 40%, you can look for a possible turn to the upside in stocks.  The 67% smart money reading is high, but can get up over 80% at times as it did this past fall.  The 29% dumb money reading is near one the lowest reading of the past two years, but the market has not been in a bear market in several years, so I suspect this could get lower too.                                 Chart provided courtesy of www.sentimentrader.com If we do see a sell-off out of this current trading range, I may make a move to jump into stocks to try to catch a week to a month of a upside action.  BUT, the market is still in a downtrend and we do want to remain cautious.  Once the market gets overbought, I would run away again.  This would be a hit and run type of move.  I still have not made a transfer in February so I have some ammunition. That's all for today.  See you back here 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.