Today's Comments (Short Term Outlook)                             Printer friendly

Breakout! Once again, the talk on Wall Street was about the bond insurer bailouts and the market responded by following through on Friday's rally with another big day, breaking the S&P 500 to the upside of the recent triangle formation. So many of us were looking at the triangle / pennant formation that formed within a downtrend and assumed the break would be down.  The market has a strong tendency of doing the opposite of what the masses are expecting.  With the breakout to the upside, are the investors and traders who are in cash willing to put it to work now into the stock market?  Possibly.  We could have been seeing a little of that yesterday after the break over 1369, the 2+ week high.  But now the S&P500 has the neckline and 50-day moving averages fast approaching, which could / should act as some resistance.                                      Chart provided courtesy of www.decisionpoint.com  The short-term is still a coin toss and looking at the chart of 1998 below we can see that just because we get a good strong day, or series of string days, doesn't mean the worst is over. After the initial low in 1998, the S&P 500 rallied over 14%, culminating with a huge one day gain of 3.6% before backing off, and eventually testing that low.  Now how difficult would it be to watch a 14% rally, and huge 3% 1-day gain, and be able to say - I am going to be patient and wait for a test before I buy?  Very.  The low made in March of 2007 saw a powerful, multi-month rally, and eventually saw a test - although it took until the following August to form (see the top chart).  I like things neat, so I would feel so much better if we saw a successful test of January's low before buying. I will say that I am not playing this the same way as I would had we had not had the transfer limit proposal over our heads.  I would take a shot here and there, but since we have to be more careful about when and how often we act, I am going to move more slowly - waiting for more confirmation. I am still in the F-fund even after it has given back all but .01 of its recent .09 1-day gain last week.  The AGG is still above support, but if you look at both the short and long-term charts of the  AGG below, you can see that there are a few ascending support lines and it's not out of the question that we move down to one of the lower lines.  But until the first support line is broke, and until the Fed gives an indication that they are not going to consider further rate cuts, the F-fund is a nice little risk reward play here.  If 101 gets violated to the downside, then you'd want to make your exit plan.  If you don't want the risk, stay in the G-fund until you are ready to buy into the stock funds again.                                      Chart provided courtesy of www.decisionpoint.com  That's all for today.  Have a great day and we'll 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.