Today's Comments (Short Term Outlook)                             Printer friendly

Big, short week Another big drop for stocks on Friday - ho hum - it's getting to be common place.  The TSP stock funds were down 2% across the board while the bond fund (F) rallied 0.41%.  Because of the wild swings, the Dow actually ended the week up 57-points, while the S&P 500 was down just 0.40%.  Trouble in the financials is getting to be old news but Bear Stearns, who earlier in the week denied the rumors of becoming insolvent, did need to be bailed out and is now actually going to be bought out by JP Morgan Chase. The market was very concerned about this on Friday, and the JP Morgan news has the U.S. market futures deep in the red (Sunday evening).  This could be the high volume panic sell-off we have been waiting on.  Tuesday morning we have the PPI (Producer Price Index) report, and later in the day, the FOMC meeting.  As I write this, the fed funds futures are showing a 52% chance of a full 1% rate cut tomorrow, and a 48% chance of a 0.75% cut.  No one is talking 0.50% anymore. Taking a look at the chart, we can see the S&P 500 is on the brink of a breaking the January lows.  I had suspected we could see a lower low, but based on the extreme reading in sentiment, I really thought we'd get a decent rally first.  But the news is too much for the market right now.                                 Chart provided courtesy of www.decisionpoint.com I do believe that this sell-off, assuming it manifests as the futures indicate, will be a capitulation and a rally will begin some time this week.  Again, that doesn't mean I believe we have seen the lows for the year.  No, we are in a bear market and we need to realize that.  But I do believe a playable rally is imminent.   Without the high volume panic selling, we were just drifting lower.  This may put a punctuation on it.  For now. With the dumb money confidence level as low as it has been in many years (13), and the smart money starting to move up toward 70, you just have to follow the prior similar readings up on the graph below to see that the odds favor a short-term bottom very soon.  Until then, who knows how ugly it can get?  But reversals can be quick so if the market plummets this morning and you like to gamble and buy the ugly tapes, you may be getting your chance today.                              Chart provided courtesy of www.sentimentrader.com This is a holiday shortened week with Good Friday closing the major markets.  Historically, this week has a positive bias with a strong negative bias on the Monday following the holiday weekend.  But with volatility so high and daily economic news seriously affecting market direction lately, I doubt seasonality will play much of a role.  But it is a also an options expiration week and that could have a major impact on the market.                              Chart provided courtesy of www.sentimentrader.com Speaking of options, did you hear that there were 55,000 put options contracts purchased last Tuesday on Bear Stearns with a strike price of $30?  At the time the stocks was trading at $65.  That was a huge bet that the stock was going to go down.  It closed on Friday at $30.  Each contract was purchased between 15 to 50 cents on Tuesday and right now they are trading near $6.00 a contract.  Nice trade, huh?  It makes you wonder how we think we can play this game when there's things like that going on.  So, the Fed is going to cut rates Tuesday, but I am now seeing that they just cut the Discount Rate (Sunday night).  That doesn't seem to be helping the futures as the S&P 500 futures are still down 33.70 as I write this.  The only guarantee I can make is that it's going to be a wild ride the next two days.  Good luck! Attention!  Some of our members have started getting certified letters from the TSP with the news that their accounts are being restricted starting at the end of the month, because they continued to make more than the two to three transfers per month after being given the warning letter in January.  They are being asked to make their transfer via mail. I wrote a little piece on the subject called Stop Trading!  It is obviously causing an uproar with those affected, as well as all of us who feel this is unfair. I have not had my account blocked as I took the warning seriously and did not want to risk it, despite my strong opposition.  All of our premium services had also reluctantly conformed to the new rules out of fear of it causing restrictions to our subscribers' accounts.  So, if you followed any of the services verbatim, you should be OK.  Please take a minute to read the article as well as the links at the bottom of that page.  It is time to get involved if you haven't already because doing nothing will likely result in the inevitable - a transfer limit and/or restricted transfers.  Send your comments as listed.  Fax them.  Email and/or fax your congressmen - they are TSP participants themselves.  Blocking someone's account in today's market environment is plain injustice. Attention RevShark subscribers:  The TSP Timing Newsletter, normally released on Sunday, will be available Monday morning at the latest.  He want to see how the morning news / futures action, before making a call.  An email alert will be sent when it's available. That's all for today.  Get ready for another wild week.  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.