Every time the market takes a dive we have gotten
our hopes up that we could be seeing the start of a
pullback. Once again the dip turned out to be
temporary - at least so far.
Friday saw an impressive rally after Thursday's big
sell-off. We didn't see the entire loss come
back, but we could see that today. Once again
I can't help but think that the high number of bears
in the sentiment surveys is keeping the rally going
as there is ammunition on the sidelines waiting to
buy each dip. A real pullback won't show up
until we see more complacency out there. Too
many of us are being defensive and the market
continues to climb that wall of worry.
Even our
Sentiment Survey system just moved to a buy
signal for this week as our bulls to bears ratio was
just 1.15 to 1. Compare that to what we saw
just before this past February's 6% drop where we
had three weeks in a row with 56% of those polled
being bullish, and a bearish percentage in the low
to mid-20's, for a ratio over 2.00 to 1.
That's a sell signal and the system was right on it.
The current 1.15 to 1 means we should be in the
market now - but, as a side note, the survey was
taken Thursday, the day the Dow was down 150 points,
so of course we would see a more bearish result
(bullish for stocks.)
Looking at the S&P 500, Thursday's sell-off took out
the support lines and now it has rallied back up to
those support lines - which may or may not act as
resistance now.
Chart provided courtesy of
www.decisionpoint.com
I suspect Friday's momentum will carry over to at
least early Monday morning as the Asian markets
perked up last night and the futures are in the
green (at least as I write this.) The test is
always whether a gap opening will sustain itself or
if profit takers will step in.
With tomorrow's (Tuesday) CPI report (Consumer Price
Index) on deck, the market may take a wait and see
approach. Estimates are for a reading of 0.5%,
and 0.2% for the Core CPI. Since I am in the
very economically sensitive F fund (bonds) I may
make a move depending on what they do today.
Bonds don't like higher prices and inflation.
If bonds rally today, we could book our gains in
case we see a "sell the news" reaction to the CPI,
regardless of the outcome. If bonds sell-off
today, we could see a bounce Tuesday. So, if
bonds are down early today, I may go back to the G
fund - even though the G fund will pay out it's
penny today. I probably should have thought of
this Friday.
We also have a Housing Starts report due out on
Wednesday. The consensus number is 1,485,000.
That would be a 9-year low and as you probably know,
the slowing housing market has become a concern for
the economy lately. Fewer houses being built
means fewer refrigerators and washing machines being
sold, less lumber and furniture, etc. A lower
than expected number may not be good for stocks, but
bonds will like it.
So these two reports could be interesting and we'll
see if they tell the same story or cancel each other
out. The bond market may not know what to do
if housing starts are very low but the CPI come in
higher than expected. If the housing
starts are lower than expected and the CPI is low,
bonds may do the Conga. If housing starts are
higher than expected and the CPI is low, stocks may
party like it's 1999. Unless of course,
investor's decide to "sell the news." Oy!
Who knows?
Trader Fred's
TSP Trader System
remains on a sell signal for now. Read Fred's current commentary on
the system page.
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