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Today's Comments (Short Term Outlook)
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The short-term continues
to look choppy Stocks opened lower yesterday, rallied throughout the day, but closed relatively flat. Volume was very light again in front of this afternoon's announcement of the Fed's FOMC policy statement . I would look for more choppiness over the next few days. With volume so light, I'd expect the Fed meeting to trigger a sharp move one way or the other, and then a reversal. This will keep us all on our toes. There could be some decent trading opportunities outside of the TSP, but because of our limits and deadlines, we are basically unable to react. The S&P 500 is holding above support, but things are starting to look a lot like the action we saw last summer. We have a steady, but choppy rally while the momentum (PMO) slowly wanes. I suspect we could see wild moves between 820 and 875 over the next week or so, but I am still thinking this is eventually going to break down, as it did in September.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk There is so much going on in the world right now; A world-wide recession, the swine flu, huge budgets and deficits, bailouts, bankruptcies, nationalizing businesses, 0% interest rates, a republican senator converting to the democratic party, the 1st 100 days of our new president, North Korea, Iran, two wars, earnings season, a 25% rally in the market after a 50% decline, etc. Is there any wonder why the market is struggling to find direction? That's why I look at the charts and indicators. Here is one that I continue to keep a close eye on - the put / call ratios. The CBOE and Equity put / call ratios are considered "dumb money" indicators. The two dumb money charts show that their bullishness may have peaked recently as they both start to head down again. These two indicators tend to follow the market, meaning it will peak near market tops and bottom at market bottoms. With both of them showing lower peaks, I would suspect that we will see lower lows in this indicator in the near future, and that will likely be triggered by a sell-off in stocks. It's a case of the indicator giving us a hint of what might be coming next.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk The OEX put / call ratio has not been as reliable this year, but the smart money has been slowly becoming more bearish during this rally, and they are now about as bearish as they have been all year. I suspect the smart money will get more bullish if/when the market does sell off, so that they they are most bullish near a bottom - the opposite of the dumb money. If this speculation plays out as it appears to be suggesting, it could be at least weeks or months before we get another buy signal from these indicators. Again, I will be looking for a lot of choppiness (rallies and sell-offs) over the next week or so, before we get a major move that sticks. The Fed announcement is at 2:15 PM ET today. That's all for today. Thanks for reading! See you tomorrow. Scribbler's TSP & Economic Report: Only a few days left in the free trial period. Please click here for more information. |