I have a lot to talk about today so I apologize in advance if I'm jumping around and rambling.
Remember the the other day I said the reversal was almost too perfect? Well, I guess it was. I know how a lot of you feel so it is difficult for me to come out here and say, yeah! If you have not been fully invested, you have done really well and preserved your valuable capital, but don't get too conservative. Be flexible when life comes back. Things are shaping up and as always, my indicators seemed to have went green early.
The market is like a freight train. It may see the stop sign ahead but there is usually a lot of momentum in the direction it is going and things don't always stop on a dime when it's time to turn around. In my case the indicators started to flash in late March. This is nothing new to me. The problem is sometimes the market does turn on a dime and if you are too patient you can miss out. Usually it pays to be patient but sometimes it doesn't. This time it would have paid off.
The ARMs index I talk about often is finally showing signs of the fear it was lacking over the past few weeks. That's good.
Looking back over charts, bottoms seem so obvious. It's when you are in one, or near one, that it is tough to see. One sign of a bottom, or being close to one, is extreme bearishness or lack of bullishness.
The new AAII Investor Sentiment Survey came out Thursday and the percentage of those who say they are bullish (believe the market will be up over the next several months) was 16%. And these responses were taken before Thursday's sell off, before we broke below 1163. It's probably closer to 10% now....
16% is the lowest reading in over 5 years. The last time we came close (21%) the S&P 500 bottomed shortly (within a week or two) and a huge one year rally followed. Bottoms tend to come when things look their worst....
Charts provided courtesy of www.decisionpoint.com
The market tends to do the opposite of what you think is obvious. The TSP Talk poll I had up recently asked if you thought 1163 was going to hold. 61% had answered yes, and as we saw Thursday, it did not. I was one of those 61% but I thought if we broke below, that would be the fear driven sell off to end it. The same thing happened when oil was about $58 a barrel. I asked if it would hit $60 this spring. A large majority said yes and oil has fallen over 10% since. We have to learn to go against our instincts. The market does, so we might as well also.
Have you noticed lately that the market sells off after positive openings? Reversals usually come after very weak openings. We may see more of that weakness early today as IBM reported less than strong earnings after the close last night. Can that trigger the reversal day we are looking for? Perhaps we will get lucky.
Did you notice that TSP.gov did not update their share prices at the normal time? It is currently midnight ET and they are still not updated. They did this the last time the market fell hard for a couple of days. I think they are trying to protect us from ourselves. I actually think it isn't a terrible idea. Usually the last ones out when the market falls are the ones hurt the most. The "smart money" buys fear as the emotional money sells it.
Oil flopped around Thursday but ended the day up 65 cents a barrel. The dollar rallied again to match the February highs.
I can go on and on but I better let the market do the talking. You've heard enough hot air out of me this week. That's all for today. Currently 60% C, 40% S fund. Have a great weekend. Forget about the market for a couple of days.
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