Today's Comments (Short Term Outlook)                             Printer friendly

Extreme's keeping us afloat Stocks put in a decent reversal yesterday taking a 230-point decline in the Dow, back into positive territory by the close.  After Wednesday's negative reversal and yesterday's early sell-off, the extremes in bearishness and oversold indicators showed us that the bears had exhausted their downside pressure. The bears did a great job pushing the indices down toward January's lows, but the bulls finally showed up to buy a couple of times this week. As I mentioned yesterday, it is not unusual to see a bear market rally move up to the 50 and/or 200-day moving averages before heading back down.  Although I am not completely sold on a successful double bottom yet (I am also not ruling out that we did put in a bottom), I just didn't think the bears had the strength to continue the downside action after a rally only back up to the 20-day moving average.  If the S&P can move back over 1350 I may consider hiding again.  The 50-day MA is near 1360, and that declining resistance line is now about 1380, and those areas should prove to be troublesome.  That may be the next test for stocks.                                 Chart provided courtesy of www.decisionpoint.com One good sign  for the bulls is the jump in volume on the positive days.  Nothing great, but at least we saw more than 4 billion shares traded.  If we do witness another test of the lows, we'll want to see a sell-off and reversal accompanied by 5 or 6 billion share day days as we saw in January. Taking a look at the NYSE overbought/oversold indicator (ob/os), when it (blue line) moves down to the -1000 level, the next rally does not always have the strength to get much over the neutral (0) level before heading back down.  And when the ob/os moves down again, the ob/os indicator does not tend to make a lower low, but the index does.                                  Chart provided courtesy of www.decisionpoint.com We have the Consumer Price Index report (CPI) this morning and that should be a catalyst for stocks and bonds (up or down?) as the Fed will be watching closely.  The Fed will be cutting rates at Tuesday's FOMC meeting but the size of that rate cut is still an unknown.  We're assuming 0.50% but 0.75% is a possibility.  The CPI could give us a better clue. We've been talking about the TSP transfer limit proposal the last couple of days because we are in the middle of the comment period of the Participants Choices of TSP Funds Federal Register, where we must state our case.  The tspshareholder.org website has given us plenty of ammunition.  I posted this on the govexec.com website yesterday:   - The TSP has not defined the problem entirely. I don't expect others to pay for my transactions any more than I want to pay to rebalance someone else's L-fund account each night. The problem lies more with the fair value adjustments and the TSP just needs to post the share prices the following morning and it will eliminate much of the costs they are seeing, particularly in the I-fund. There are many government employees and some military folks who are in favor of the limits mainly because they do not actively manage their accounts themselves.  I don't blame them for not wanting to pay the costs for those who do (even though we know that is not entirely the case because of fair value adjustments - something they are not even aware of) but also in their defensiveness they are missing something.  I don't think they realize just how much trouble they can be in when it comes to building up their accounts in order to retire at a decent age.  I'm talking mainly about FERS employees.  Even if Social Security is still around in 10 or 15 years, your TSP account balance may be what determines when you retire.  When you consider that the S&P 500 ended 1999 with a closing price of 1469.25, and it is currently trading at 1308.77, that is a return of -11% (a loss of 11%) in the last 7 years.  We have a little slogan here at TSP Talk that says, "Friends don't let friends buy and hold" and this data proves why. Sure your accounts are most likely higher now than they were then because of the 7+ years of contributions you have made since the end of 1999, but theoretically for every $1000 you had at that time, you only have $890 of that left had you been invested 100% in the C fund the entire time (dividend excluded).  And with inflation at 2% to 4% a year, that $890 from 1999 isn't even worth $890 dollars anymore.  We figured that it has cost each TSP participant in the neighborhood of $3 to $4 per year  (yes, per year) to cover the cost of trading in 2007.  How much has it cost a participant to sit in a buy and hold inactive account the last 7 years?  It's time for them to get out from under their rocks and get involved.  Individual investors have a big advantage over institutional investors like mutual funds.  We can go from 100% cash to 100% stocks in one day, and vice versa.  That is our advantage. Why not use it?  Maybe some folks want to work into their 70's? That's all for today.  Let's hope you are in the right fund(s) 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.