Today's Comments (Short Term Outlook)                             Printer friendly

Overbought weakness It was not rocket science.  Stocks were overbought after the huge rally we experienced the prior week or so, and the market pulled back. No real harm done yet, but we are still in a bear market and an overbought bear market does tend to pull back.  The problem is, we were hoping the recent successful test of the January low would mark the beginning of the end of the bear market - and that may happen - but right now the  indices are playing by the book.  You sell rallies in bear markets.                                  Chart provided courtesy of www.decisionpoint.com Picking a bottom is very tough, and as we have said before, those who are risk averse may want to wait for confirmation from the charts before getting into stocks.  We had a successful test, and a very playable bounce, but we needed to clear resistance and make a higher high before we can confirm a reverse in trend.  Simply put; we are still in a down trend. Not surprisingly, the recent strength saw an increase in bullish sentiment.  The bullish percentage in the AAII Investor Sentiment Survey rose to 42%, while the bearish percentage dropped to 34%.  That made a 1.24 to 1 bulls to bears ratio.  Those numbers are hitting areas where we have been seeing rallies come to an end during this bear market.                                  Chart provided courtesy of www.decisionpoint.com Our TSP Talk Sentiment Survey came in at 43% bulls, 46% bears.  A little more bearish, but it was taken a day after the AAII survey so that is to be expected after the last two days' sell-off. Looking at the seasonality data, I'll let Jason Goepfert from sentimentrader.com tell us what the next few days are like historically... "During bull markets, the end of March/beginning of April was positive 68% of the time with an average return of +0.2%.  The returns were typically quite positive, but there were 2 years out of the 41 that qualified that showed large negative returns and skewed the average lower.   "During bear markets, of which we qualify now, the upcoming four-day stretch was positive only 38% of the time (6 out of 16 years) with an average return of -0.1%.  Opposite to the paragraph above, most of the returns were solidly negative but a few large gainers skewed the return." With little else on the news front in the next several days, next week's ISM and jobs reports should prove interesting.  A bear market devoid of news has little in the way of a catalyst to move upward.  Without an injection of something positive, we could see the indices drift lower, or chop around at best, into these these reports. I don't know if we have seen "the" bottom yet, but at least we did get "a" bottom, and that gave us a nice playable bounce.  I was thinking (and hoping) we'd get a 10% to 15% rally, but I believe we only saw 8% from low to peak.  Now we wait.   That's all for today.  If you haven't had a chance to read TSPshareholder.org's latest newsletter, I would highly recommend it.  As a matter of fact, it is your weekend homework assignment.  There may be a quiz on Monday.  Have a great weekend!   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.