...and down again.

The relentless chop continues.  This pullback has now lasted an amazing 8 weeks.  Once again I have very little to add to what I have been saying for about 3 or 4 weeks now.  That is that the market is oversold, sentiment is very bearish (which is bullish), put/call option ratios and odd lot trading are indicating that the "dumb money" is very bearish (also bullish).  I'm starting to wonder who the dumb money really is.

In the chart below I circled the May 2004 bottom and the current low.  It took almost three weeks of chopping around in May before a rally finally started.  We are closing in on that now. 


                     Charts provided courtesy of www.decisionpoint.com

The reason I keep comparing the current chart to past situations is because history does repeat itself.  That is because a market is made up of people.  Emotional people who repeat reactions during similar situations as they present themselves.  Of course there are many other factors but during market bottoms and tops, fear and greed determine when and where the turn takes place.

The results of the new AAII Investment Sentiment Survey came out yesterday and the bears are out-numbering the bulls again 35% to 30%.  Usually a great sign but lately the market has been shrugging off these normally strong buy signals.  You start to believe you should ignore these signals after being burned repeatedly for weeks, but of course you should not.

I know many of you who are still invested are considering getting out.  I would never tell you not to because you have to be comfortable with your investments, particularly if you are close to retirement.  But in my opinion the only thing worse than being in the market when it is going down, is catching the downdraft and missing the rebound.  My indicators are still in the same buy zone and I am not going to go against them now.  They can be early as we have seen many times, and patience is not my strong point.  As I've said many times, buy fear and sell euphoria.  I may be emotional but my indicators are not, no matter how much fear is out there.  There will be a better time to get out than now.

Fridays haven't been too great lately but the good news is if the short term chop is going to continue, today should be up.  

Currently 50% C, 20% S, 30% I fund.  Have a good weekend.

Administrative note: I am weeding out bad email addresses as we approach 5000 email alert members.  I deleted over 200 addresses because they were either invalid or being blocked by an ISP.  Because I send out multiple emails, sometimes using the same subject line, this mail may be flagged as spam by your ISP.  If you think you should be getting the emails but you are not, you may need to sign up again, but you will also have to get your ISP to stop blocking mail from alert@tsptalk.com.  I know email addresses with ".rr." (Road Runner) in the name have all had problems.