Special weekend update.  Friday's comments left you with a lot of uncertainty so I wanted to give you a quick update on my short term outlook.  

After looking at dozens of indicators and reading several articles on the current market situation I came to this conclusion.  The market seems to be in a neutral zone and everyone is confused!  That makes me feel a little better.

• "There's no real reason to become a buyer or a big seller here, the market isn't giving us any clear indication of which way it wants to go. It's looking for the numbers from next week's employment report."  Robert Pavlik, a portfolio manager at OakTree Management.
  

• "It just seems to have flattened out.  So, this could be the beginning of a topping out process that leads to a more significant correction, but there's still money coming into the market, and that's going to cushion whatever decline we get."  Ken Tower, a chief market strategist with Cybertrader.

Most of the sentiment indicators are neutral to slightly bearish.  I feel better now about being on the sidelines.  There doesn't seem to be a reason to take a chance here.  See you Monday.

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Friday's comments:

They have me running scared.

I have to be honest, I am very unsure about the market for the next week.  Each index seems to have a mind of it's own lately.  So what to do?  I decided to go hide again.  I'm back in the G fund beginning today and I don't think I like it. Am I driving some of you short-term'ers crazy yet?    

I'm seeing so many mixed signals that I really can't decide which funds to get in right now.  What's up with the I fund?  The Asian markets were up solidly on Wednesday night and Thursday the EAFE was flat to up slightly.  So why the I fund was down .07 yesterday is beyond me.  As I write this (Thursday night) the Hang Seng (Hong Kong) and Nikkei 225 (Japan) indices are up very big.  Because I pulled out of the I fund Thursday morning, I won't see any of that gain in my account.  Those of you who follow my short term strategy and missed yesterday's late transfer to the G fund announcement, will probably be rewarded with a nice day in the I fund.

The S fund has rebounded nicely, up 1.7% during my two day stint back in stocks.  The timing was right but I only had 20% allocated to that fund.  The C fund was up also but the I fund losses negated those gains.  So I ended my little jump into the market with a whopping .14% gain.  I have been so afraid of being exposed to stocks during this pullback because I'm only up 1.5% for the year, and I've had to fight for that in the 9 total days I've been in stock the funds.  To give that back would be very demoralizing.  

What is frustrating is that I see the making of a strong day today and I'm out again.  I hope for my readers' sake that we do have a nice day.  As I mentioned, a lot of you missed that transfer yesterday.  You are still heavily exposed to the stocks funds today.  That's the good news.  

The bad news is I don't know if you should get out today.  The Nasdaq was getting heavily oversold but it has not had the three waves down we expected.  Only two.  Is this rally just a fake out to suck us back in?  That's the way I am reading it but again, I admit the short term has me puzzled.  The larger, non-tech stocks of the S&P 500 did not get hit as hard as the Nasdaq so it is not surprising that it is not rebounding with the same strength.  The I fund is down about 3% from it's high, just about how far the S fund came down before it's recent rally.  

I really wish they would give us until 4:00 PM EST to make transfers like most mutual funds.  We have to act halfway through the day before we know what happens in afternoon trading.  They went from one transfer a month to one a day, which I couldn't be happier about, but would it be too much to ask for four more hours?  

I don't want to overdose you, but since I'm not helping much today, let me show you something that may help you make a decision.  Here is the the AAII Investor Sentiment Indicator.  Basically it says when "the herd" (A term for the majority of investors) is real happy, start getting nervous and when the herd is getting nervous, start buying.  The opposite of what you might think.

                              Chart provided by www.decisionpoint.com

The green lines indicate the percentage of people who responded to a survey and said they were bullish, the red line is the bearish percentage.  So looking at the first week in February, for example, you can see about 50% of the people asked were bullish as opposed to about 21% that were bearish.  Notice that when the bulls start getting near 60%, the S&P 500 tends to DROP (follow the line up to the S&P 500 chart).  And when it gets down to 50% it tends to go UP.  Again, the opposite of what you might think.  This is why I like to go against "the herd".  

As of this past Wednesday's survey we see that there are 42% bulls and 30% bears, the lowest readings on the chart going back to September.  Could this be a buy signal?  According to this indicator we would expect a rally here soon.  In fact we did see the beginning of a rally Wednesday after a two week drop, with the S&P 500 being up two consecutive days.  Of course this is another short term indicator and the numbers change weekly.  Take a minute to look at this over the weekend and let it it sink in.  Very interesting stuff these indicators.  

That's all for today.  Currently 100% G fund AGAIN.  Being that I've left you on a Friday with nothing but uncertainty, I may write up some comments this weekend if I get a chance.  Hopefully Friday's market action will answer some of my questions.  Have a great weekend. 


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Highlights from Thursday's Comments (see archives for full article):

Update - If you are on my email alert list or read the message board this morning, you saw that I made a transfer back to the G fund.  This was a defensive move and I wouldn't worry if you missed it.  I will explain the reason why in Friday morning's comments.  I apologize if you missed this one.  I usually can't update my site, including the comments, during the day so I use the email alerts and the message board.
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I don't want to scare any of the new readers too much with my quick transaction talk.   I do actually talk about the longer term outlook at times.  I am more proactive with my account so that takes up much of this short term comment forum.  The longer term outlook doesn't change too often.  

While we're on the subject, the market is acting really well for the longer term .  This consolidation is exactly what we needed so we can get on with the bull market.  Markets that go straight up eventually come down hard.  When they go up some, pullback a little, go up again, come down some etc., it is very healthy action telling us we are still in a strong bull market.  The second half of 2003 and early 2004 saw little downward movement so this is welcome action.  Just give it another month or two.  For more info on the longer term you can check out the longer term outlook page.  The links are normally below these daily comments.