Impasse.
I was heavily exposed to stocks Thursday, as were many of you based on the recent poll, and we were looking at a very weak day before the rumors of the possible capture of al Qaeda's number two leader surfaced. We ended the day down but only modestly. After Wednesday big day, I was not complaining. Today I am 100% in the G fund.
There can be a case made for being bullish or bearish right now. Up big one day, down the next seems to be the trend. Since it can go either way, I decided to go with the charts I have posted the past two days as a tie breaker. I will repost them today.
This chart shows that
Friday tends to be the worst day of options expiration week (blue) and the week
following options expiration week (in red) is
typically weaker than normal.
Chart courtesy of www.sentimentrader.com
As the sentiment indicators start to show more and more pessimism, I believe we are very close to a bottom but we may get one more push down before a new rally can begin. Take a look at this put/call ratio chart (number of options bought betting the market goes down (puts) divided by the number option bought betting the market goes up (calls)). It is showing extreme levels of pessimism that we see near market bottoms. But if you look at the last few times it hit these low levels, you can see the market had a small rally, before it gave way to one more wave of selling. Only in late 2001 did it go straight up. I think we were in that small rally zone early this week. The calm before the storm so to speak.
Chart courtesy of www.sentimentrader.com
Today's poll (on the left) is a simple yet interesting question. How bullish or bearish are you for the year? How much will the S&P 500 be up or down by year's end? It's interesting because sentiment surveys are only good if you know how knowledgeable and market savvy the participants are. To get a good contrarian view, your participants need to be average folks. I think the people that read this board are a little more savvy than those average folks so I am very curious to see the results. I'll leave this question up through the weekend.
Here are the results of yesterday's poll; The majority of your TSP is currently in...
| G Fund | 11 | 12% |
| F Fund | 2 | 2% |
| C Fund | 21 | 23% |
| S Fund | 38 | 42% |
| I Fund | 12 | 13% |
| About Even | 6 | 8% |
These numbers would probably change if I asked it again today.
That's all for today. Currently 100% G fund. Have a nice weekend.
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Highlights from Thursday's Comments (see archives on left for full
article):
I certainly could be wrong but I believe we are not out of the woods yet. I am pretty satisfied with the market's 200 point rally the past two days. I'm looking to get out before that last sell off but will it come today, tomorrow, next week...? It's tough to be on the sidelines when the market is going up and that is just what you would risk if you got out now. But being in the market when it is going out is a lot worse. Of course I'm talking about the short term approach. If you are in it for the long term and are not making many moves, stomaching volatile swings is part of the game. You suck it up knowing we are in a bull market and at year's end, you will be happy with your increased balance. But for us looking at the short term, missing a 2-5% sell off is what rocks our boat. The put/call ratio chart I showed yesterday, displayed again today at the bottom of the page, shows there is a fair possibility of getting one more push down.
I don't want to sound too bearish, because I am bullish for the long term, but the indices took a hit technically and this dead cat bounce hasn't proven anything yet. A move to 1160 on the S&P 500 would be a green light but that's almost 40 point away. I don't want to miss that move, but until we get there, this is still considered the consolidation period. During this type of market action you buy low and sell high.