Today's Comments (Short Term Outlook)                             Printer friendly

We need a test The market did another impressive reversal from the dismal open yesterday.  After being down over 200-points early on, the Dow was up over 250 before settling up 207-points.  Guess where we ended up on the S&P 500?  Bueller? That's right; right back up to the neckline.  The technical picture is keeping me grounded but the highly volatile and emotional trading continues making it quite tough to stay the course - whatever course you happen to be on.  200-points up, 200-down, all happening intra-day, a couple of times a week?  That's some serious volatility.  So here we are back up to 1378.  We were thinking the 1380 to 1410 area would be where the S&P would find some resistance and so far that is so.                                  Chart provided courtesy of www.decisionpoint.com  A good solid market bottom is usually accompanied by a test of the lows, making a double, or "W" bottom.  Let's take a look at the charts of some of the more notable major market bottoms, 1987, 1998, and 2002.  They all have something in common;  A major sell-off, a choppy rebound back up, followed by a retest of the lows.  It's no guarantee, but it is sure a nice clean signal to get back into stocks when they hold.                              Chart provided courtesy of www.decisionpoint.com  Now there are plenty of double bottoms that fail.  That's called another leg down and that's our queue to stay away.  That means the correction, or bear market, is going to continue.  Google reported disappointing earnings after the close last night which hurt the overnight futures, but before the market opens, we will be getting the January jobs report and that should overshadow Google's results.  If the jobs report is positive, I wouldn't be surprised to see another pop and drop - that is, an intra-day rally that fails by the close.  Investors and traders seem to be taking profits on Friday's during this correction.  If the report is disappointing, well, we could see that test sooner rather than later. The TSP Talk Sentiment Survey came in at 40% bulls, 48% bears for a 0.83 to 1 bulls to bears ratio keeping that system on a buy signal and a 100% S-fund allocation.  I have been cringing with each buy signal but this is an emotionless system and it will do what it's going to do, no matter what I think. Bottom line: Don't let the big rallies get you too excited.  They have all been sold the past several weeks and we have no reason to trust the market right now.  That doesn't mean it won't go higher, but I have my guard up.  That's all for today.  Have a great weekend and we'll see you back here on Monday. 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.