Today's Comments (Short Term Outlook)                             Printer friendly

Sell the news Stocks rallied early yesterday but selling kicked in, in the afternoon.  The major indices did close positively, but this market is still appears to be in trouble. The ISM Services report came in higher than expected 48.0, and that helped the morning rally, but it was still under 50 (49.3), which indicates contraction. As I mentioned yesterday, RevShark pointed out to us that we could see a sell the news reaction from the bond insurer bailout announcement, and that's what happened yesterday as Ambac made the announcement at 12 noon ET, and the stock declined on the news.        The initial knee-jerk reaction to the news for the major indices was a pop up, then an immediate drop as the Dow declined 200-points over the next hour and a half, before an oversold bounce into the close...         It is a positive that the S&P 500 has been able to close above the 1310 low close made in January, but the fact that the NYSE is so oversold, it may just be a matter of time before that is broken.  And that's not necessarily a bad thing for the intermediate-term.   We have resistance at 1350 and 1380 so I would I would think the S&P 500 would run out of gas at those levels at best.                                  Chart provided courtesy of www.decisionpoint.com The sooner this market can experience a capitulation sell-off, the sooner we have a chance to put in a bottom, even if it is temporary.  Trying to play these small rallies in our TSP is very dangerous, not only because of the deadlines and delays we have to deal with, but now we have to conserve or transactions for more meaningful moves in the market.  The rallies we have been seeing have not been accompanied by a spike in volume which means the big money is not embracing them.  This is a formula for  continued failed rallies.  We can get these 2 or 3 day rallies but during a bear market, the chances remain high that they will fail and we'll head back down.  If we can get a good sell-off on high volume for a day or two, preferably testing the 1270 area on the S&P 500, we may have ourselves a meaning bottom to go back to playing the stock funds.  Until then, and I am going to continue play it cautiously unless the technical picture improves dramatically without a double bottom. We have an important jobs report on Friday and next Tuesday we have the next FOMC meeting and interest rate cut on tap.  Volatility should pick up. That's all for today.  See you tomorrow.    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.