Market Comments March 24, 2009 TSP Fund share prices as of: 03/23/09 Fund - G Fund F Fund C Fund S Fund I Fund 12.8138 12.5517 9.5770 11.2139 12.6200 $  Change - 0.0031 -0.0012 0.6336 0.7657 0.6875 % Chg day - +0.02% -0.01% +7.08% +7.33% +5.76% % Chg wk - +0.08% +0.83% +8.79% +9.31% +12.12% % Chg mon - +0.18% +1.03% +12.14% +11.45% +11.98% % Chg 2009 - +0.57% -0.23% -8.22% -8.13% -11.47%   L2040 L2030 L2020 L2010 L Income 11.5957 11.8530 12.2241 13.5595 12.6373 $  Change - 0.6051 0.5469 0.4740 0.2625 0.1714 % Chg day - +5.51% +4.84% +4.03% +1.97% +1.37% % Chg wk - +8.12% +7.10% +5.95% +2.92% +2.03% % Chg mon - +9.93% +8.75% +7.37% +3.71% +2.63% % Chg 2009 - -7.16% -6.10% -4.94% -1.98% -1.15%

Today's Comments (Short Term Outlook)

News driven rally Stocks soared again on Monday after the Treasury announced more details on the bank rescue plan, plus a surprisingly positive housing report.  We saw the C and S funds pick up an incredible 7% on the day. The S&P 500 plowed through resistance like a hot knife through butter, and opens up the possibility of a move to the higher resistance levels - or a quick reversal down.  Don't forget the  three day closing rule.  The PMO buy signal earlier this month, as well as that 70% bearish reading in the AAII Investor Sentiment Survey a couple of weeks ago, turned out to be great indicators of strength to come.  Too bad not many of our other indicators were on the same page as perhaps a few more of us might have caught this rally.                    Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk Trader Fred posted a very telling market strength chart in mid-February that should have been a wake up call for a rally as it was spot on, but it did come much earlier than usual (about 2-weeks earlier than usual), and several of his other indicators did not confirm the strength.  But his current subscribers can see what may be coming next based on this same chart.  Let's see if that turns out to be as accurate. Last week, Carl Swenlin of DecisionPoint.com wrote this in one of his occasional commentaries: "Quite a few years ago I used to write a daily newsletter, but I decided to give it up because it got tiresome trying to invent new ways to say the same thing over and over. More important, having to form an opinion on the market every single day, especially during volatile times as we have been experiencing, can build a of stress. Also, since I am primarily focused on the intermediate-term and long-term time frames, it can be counter productive to put too much effort into short-term analysis." -- Carl Swenlin www.decisionpoint.com I know just how he feels.  I came out late last week saying that, based on the charts and indicators, I would not want to be in stocks this week.  Then, bam! - We get a news driven rally to end all rallies.  Pretty humbling and stressful.  But again, we know that rallies such as we had yesterday more often than not, happen in the middle of bear markets, so staying cautious is still on the table. I will now turn to www.Sentimentrader.com for a little insight on the strength we have seen after hitting a 3-year low.  Jason says: "Below are all dates since 1928 where the S&P hit at least a 3-year low during the month, then rebounded to close +5% or greater:                                A year later, the last two were positive and did indeed mark major market bottoms. The others, from the 1930's with which we are all now so familiar, led to horrid returns. "Bottoming" is a function of time frame, so here are the same dates with a 5-year forward horizon:                                Looks quite a bit different. All were positive, with an average return of +59%. The risk/reward was skewed nearly 2-to-1 to the "reward" side. Obviously the 1930's led to a painful drawdown, but you did come out whole if you held long enough." -- Jason sentimentrader.com So this could be a long-term positive, but we may need to endure more pain over the next several months / years. Also on Sentimentrader.com, the Smart Money / Dumb Money Confidence indicator saw a sharp move higher for the dumb money after the recent market strength.  This is typical, as is the fact that the smart money actually pulled back their confidence in the market.                                          Chart provided courtesy of www.sentimentrader.com Neither of the two readings are in the "extreme zone" of below 40 or above 60, so I don't know if this is telling or not.  I just wanted to show how the dumb money is more likely to become more bullish during rallies - about the time the smart money starts to take profits. Back on March 16 we talked about the dollar getting a PMO sell signal after a double top.  Once again it is nice to see an indicator actually helping us see the direction of the next move.                     Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk I also stated that a falling dollar would not necessarily be a bad thing for the stock market, which turned out to be true in this case, but that down the road it could be a cause for concern on the inflation front.  This new $1 trillion rescue plan is not doing the dollar any favors. Our usual indicators are still flashing warning signals of overbought and overly bullish, so this rally hasn't changed too much.  Perhaps a pullback will help the indicators move into a more bullish stance, but until then, I am at their mercy.  There's no way I would chase here, right or wrong. That's all for today.  Thanks for reading.  We'll see you back here tomorrow!