Today's Comments (Short Term Outlook)                             Printer friendly

Targets The overbought market ran out of steam yesterday, which is typical behavior in a bear market.  The Dow shed over 100-points, but bear markets can pack some serious rallies that will leave us scratching our heads.  What's your plan? Looking at the S&P 500, we are in the midst of a decent rally off of the recent lows.  The neckline has now been penetrated to the upside although there is still more serious resistance overhead.  The chances of the market retesting the lows made in January are quite high, but before that happens, can the S&P make anymore headway to the upside?  Sure, but it is more likely a selling opportunity. The potential target areas for this rally are 1410, 1430 (which provides double resistance), and 1475, which is possible, but a long shot.  Then there is the 50-day moving average which is currently 1415 but dropping.                              Chart provided courtesy of www.decisionpoint.com  On the downside there is the January low of 1265.  That will be a test, but there's no guarantees it will pass.  Some say we are in a recession or getting close.  Some say we are in a bear market.  The average length of a typical bear market is about 9-10 months.  Obviously some last longer, and some shorter.  If we are in one, we are four months into it, so we could have awhile to go.  But what makes a market is that for every seller, there is a buyer and those buying right now believe they are getting bargains.  Buying slowly into a bear market decline is not a bad way to go, ala dollar cost averaging, but with the TSP breathing down our necks about how many transfers we can make, we can't really buy 10% at a time every week or two.  That's another downfall of the limits.  It's going to have to be all or nothing, or as they'd prefer - do nothing (buy and hold).  That's OK.  I've been using an all or nothing approach for years. Speaking of the transfer limits, they are not set in stone yet since the new rules are very vague and the TSP has to make a decision on how they want to proceed.  The fight is far from over but the TSP is watching the active traders making some threats.  We definitely don't want to give up the fight but we also don't want to lock up our accounts in the interim.  All of our systems have made adjustments to accommodate the tentative rules, just in case.  I have no doubt that we will be able to take advantage of the market swings regardless of the number of trades we are allowed.  The Sentiment Survey System is one of our least active systems and it had the highest return in both 2006 (+28%) and 2007 (+21%) making less than two trades per month both years.  Making 2 to 3 well timed trades per month is tying our hands and I completely disagree with their decision, but it is far from being a deal breaker for market timers.  The goal is still to beat the market (S&P 500 is the benchmark) and a diversified account by year's end.  Bottom line:  The market could see some strong rallies now and then, but the charts still tell us to stay cautious.  That's all for today.  See you 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.