The train kept 'a
roll'in
The
stock market can be like a freight train in that once it gets moving, it
can be tough to slow down, stop, and turn in the other direction. We are
seeing some serious upward momentum now and when that will end is a
tough question.
This recent bull run began in mid-October and has done little to correct
or pullback since. The S&P 500 is currently trading along the
upper end of the trading channel as it has for several months now.
While I have been saying that we due for some sort of overbought
pullback almost the entire time, we obviously have not had one.
And rather than pull back into that trading channel, the S&P 500 has now
actually broke out above that channel.
Chart provided courtesy of
www.decisionpoint.com
Trying to pick market tops and bottoms can be quite tough because of
momentum. If you are wrong, you either miss out on some potential
good gains on the upside, or you take more losses on the downside.
If you are right you can miss some account damaging losses when the
market turns down, or catch a strong push higher at just the right time.
Sometimes that first move happens too quickly to act. If you look
at the drops in March of 2004, or January and March of 2005 in the chart
above, you can see how quickly the market can fall apart. Likewise
strong rallies off the bottom can have you missing the main thrust of a
rally, waiting for a better buying opportunity that never comes.
Although that is not always the case, you can look at the tops and
bottoms since January 2004 and you can see that it is typically "V"
bottoms or ^ type tops (that's supposed to be an upside down "V"
in case you were wondering.) Since late November the market has
resisted pulling back in a strong ^ top but rather has had minor
pullbacks only to pop back to the resistance line.
According to SentimenTrader.com's buy/sell confidence indicator, which
is an accumulation of many sentiment indicators, the "smart money" just
fell to 38%. 60% and above is a buy signal, and anything below 40%
is a sell. Normally you'd like to see the "dumb money" above 60%
to confirm the buy signal but they have been sitting at 50% (right in
the middle) for a couple of weeks now. So even with the recent
strength in the market, we haven't seen "the herd" get overly bullish
yet. That's one positive for the market.
I am still positioned for a pullback but who knows when this upward move
will end? It could be days, weeks months? If you are taking
your chances in stocks you are being rewarded nicely at the moment.
I just hope you don't get blindsided by any kind of severe drop.
It's the chance we all have an opportunity to take.
Today starts another post options expiration week (POEW) and Mondays of
these weeks have not been particularly good this year. We've seen
some positive POEW Monday morning market openings turn sour as the day
progressed. The POEW's themselves are also below average
return-wise when compared to a random week.
Next week the Fed meets again to raise interest rates. Will the
market fall going into that meeting or has the market already factored
in those rising rates?
That's all for today. Currently 100% G fund. Thanks for reading.
Important note: From the TSP.gov website:
http://tsp.gov/curinfo/emailscam.html
E-Mail Scam
Some TSP participants have received an e-mail purporting to be from the
TSP. The e-mail asks for confirmation that the participant has added an
e-mail address to their TSP account. The link in this e-mail takes the
person to a bogus version of the TSP account access screen where it asks
for your Social Security Number and PIN. It then takes you to another
screen where it asks for credit card and banking information.
PLEASE BE ADVISED THAT THE E-MAIL IS NOT AN OFFICIAL THRIFT SAVINGS PLAN
COMMUNICATION!
You should
never give any personal, credit, or banking information in response to
unsolicited e-mails; the TSP would never ask for this
information via an e-mail. If you did provide this information, contact
your credit card company/bank immediately and seek guidance. In
addition, call the TSP and ask to have your account access blocked
(1-877-968-3778).
Do
not try to access the TSP Website by clicking on links in this or any
other e-mail. They are trying to steal your personal
information (always access your account only by opening a new Browser
window, and typing http://www.tsp.gov into the Address/URL field).
The
TSP is actively investigating this matter. In the meantime, it
has temporarily suspended the Account Transactions portion of
Account Access.
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