Buy
Fear?
In yesterday's comments I mentioned that Tuesday's action was the
type of day I feared. I actually said I feared it because of the
way we have to manage our TSP accounts (the deadline and delay) but never-the-less, the fear
meant it was appearing as if we were going to see a bad day on Wednesday. My
normal strategy to buy fear and sell euphoria would have worked yesterday.
It's just that I don't usually mean to buy my fear, but rather
the herd's fear. It seems
to work both ways I guess.
The market rallied strongly
Wednesday and while it was quite positive, it was interesting that the S&P 500
closed yesterday (Wednesday) at 1305.04 gaining back all of Tuesday's
losses almost to the penny as the S&P closed at 1305.08 on Monday.
What does this mean? Three out of the last five days closed at
1305 after four moves up to 1310 another down to 1296. It may not
have any significance, but it is the category of things that make you go,
hmmm. Perhaps it has to do with options expiring last Friday - I
don't know.
Microsoft announced that they're delaying the release of their new
Windows Vista operating system. That led to a negative open for
tech stocks as many companies are relying on this new release to trigger
more upgrades for their computer related businesses. But as the
day went on, the techs caught the rally fever, even though they did lag
the field.
So, the market rallied - good, the Nasdaq lagged again - not a
great sign, and volume was on the light side - lower than the
volume of the prior day's drop - a little troubling for the bulls.
It's hard to argue the fact that the market remains resilient. The C
fund got back all of Tuesday's losses while the S and I funds also did
well but did not
quite get it all back.
The OEX options traders, considered "smart money", have been slowing
getting more bearish as they are buying more put options than calls.
Puts are "bets" that the market is going to go down. Calls are
bets that the market is going to move higher. In the case the OEX
options are "bets" on the direction of the S&P 100, the index of the
largest 100 stocks in the S&P 500.
While we are getting close, we aren't quite near a sell signal here yet.
The indicator did break down from a recent consolidation area moving to
1.39. This is a 10-day moving average of the put/call ratio and it
means there was an average of 139 puts bought for every 100 calls.
Chart provided courtesy of
www.decisionpoint.com
The OEX options traders are not necessarily betting heavily against the
market. Put options are also used as a hedge against the stocks
they own. It's kind of like an insurance policy. They are
saying, if stocks are going to fall, I want to offset any losses my
stocks take by making money in put options. So the overall
attitude of this group is getting more cautious, but it doesn't always
mean the are outright bearish. At 1.50 or 1.60, it becomes tough
not to listen to this "smart money."
Let's see what the rollercoaster has in store for us today. Currently 100% G fund. Thanks for reading.
See you tomorrow.
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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