Today's Comments (Short Term Outlook)                             Printer friendly

No bad news, is good news No financial institutions failed yesterday so the market took the opportunity to move higher from its deep oversold levels.  The Dow put in its second 400-point gain in the last six days.  The last one didn't hold very long.  Will this one? If it was the Fed rate cut that caused the rally, we would not have seen a 300-point rally before the announcement.  I didn't really think the PPI report was all that great, but the market didn't seem to mind.  Some decent earnings reports from Goldman Sachs and Lehman Brothers and it was off to the races. The Fed cut 0.75%, a notch lower than estimates, but after the initial knee-jerk reaction down, investors must have realized that less could be more - "Maybe things aren't 1% bad."  More likely, the Fed may have wanted to leave themselves room to cut again at the next meeting, which they did hint toward. We have been burned before so of course the caution flags are waving, but we don't want to be blinded by fear.  Keep an open mind that this could be a bottom.  It may not be, but keep it open as a possibility.  A 4% rally is a rare event for the major indices so I hope you were able to take advantage of it.                              Chart provided courtesy of www.decisionpoint.com That SentimenTrader.com smart money / dumb money confidence chart that I posted a couple of times recently, saw the smart money move up to 75, and the dumb money down to 13.  When the smart money is over 40 and the dumb money is under 40, that indicator gives a buy signal.  13 is one of the lowest readings in many years, and 75 is a big number for the smart money.  These kind of numbers usual triggers a decent short to intermediate-term rally.  Perhaps Monday's reversal, and Tuesday's big rally is the start. Of course, until we see something different in the chart, this is a bear market and even if we do get a decent short-term rally, it doesn't mean the downtrend is over.  We can actually rally up toward 1400, or even 1450 on the S&P and still be in a bear market.  It depends how it play outs on the chart.  I think the next big test might be near the 50-day moving average (1350-1360). Just a reminder that Friday is a holiday for the U.S. stock and bond markets.  Last year the TSP did not post closing share prices on Good Friday, but I have not seen any message on their website stating that they are not processing transfers.  Fridays have not done well during this bear market, as investors have been fearful of holding positions over the weekend.  With Friday being a holiday, Thursday may be that day this week.  It could be a good test for the market.  If the indices can hold on to their gains by Thursday's close, we may have something.  If not, it's back to the bear. Because of the holiday, I am putting up this week's Sentiment Survey a day early so I can post the results on Thursday instead of Friday - just in case we can't make transfers on Friday. If you are interested... March Madness on TSP Talk / Yahoo! -Deadline: 1st game tip off on 3/20/08, about 12 noon ET.  Prizes awarded.  TSP Talk shirts, mugs, subscriptions, etc. That's all for today.  See you back here tomorrow. If you haven't already, please take a minute to read Stop Trading! 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.  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.