Today's Comments (Short Term Outlook)                             Printer friendly

Volatility still the game The market closed higher yesterday after some serious ups and downs.  We saw a 130-point gain in the Dow turn into a loss within an hour, before rallying again into the close.  The volatility game continues. When volatility is high, caution is warranted.  Sure some of those days will be higher, but for the most part it is a sign of trouble.  Yesterday's gains brought the S&P back to where it closed on Tuesday - erasing Wednesday's loss.  But the low yesterday was lower than Wednesday's, and the high was also lower than Wednesday's.  The fact that the index closed higher only mattered to anyone who move into, or out of the C or S funds yesterday.  Otherwise, the day was just another day in the downtrend.                                      Chart provided courtesy of www.decisionpoint.com  While the C and S funds managed nice gains, up 0.80% an 1% respectively, the I-fund took a 0.92% loss, mostly because of the strength of the dollar yesterday.  It is now on the high end of it's recent trading range.  It will be interesting to see if the strength can continue above the resistance.  The long-term trend is down so it seems more likely that we could see at least a  short-term move back down.                                  Chart provided courtesy of www.decisionpoint.com  The drop in the dollar coincided with a rise in bond yields, which is negative for bond prices.  The F-fund lost a half of a percent yesterday, and is now actually in a position of support.  Since July, each time the AGG moved down to the 50-day moving average, the bond market found its footing and began to move higher again.                                   Chart provided courtesy of www.decisionpoint.com  So either the economy is getting stronger, or we should see the dollar move down, and bond prices move up, in the near-term.  It interesting that the economically sensitive transportation index has been out performing lately, although that is mainly due to some merger and buyout speculation, and bargain hunting.  Bottom line: Caution is still warranted.  Stocks are in long and short-term downtrend and trying to pick a bottom could be dangerous.  We could see a rally here and there but until resistance is taken out on the upside, and the market can keep from selling off when overbought, we want to remain patient.  That is unless you are able to stay very nimble. That said, emotionless TSP Talk Sentiment Survey System will remain in the S-fund next week after this week's 0.55 to 1 bulls (31%) to bears (56%) ratio.  That's all for today.  Have a great weekend. 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.