Market Comments

May 17, 2007

 

Fund share prices as of: 5/16/07
Fund - G Fund F Fund C Fund S Fund I Fund
11.92 11.36 16.87 20.26 24.30
$  Change - +0.00 +0.01 +0.15 +0.11 -0.08
% Change - +0.00% +0.09% +0.90% +0.55% -0.33%
  L2040 L2030 L2020 L2010 L Income
18.20 17.31 16.48 15.16 13.15
$  Change - +0.07 +0.06 +0.05 +0.03 +0.02
% Change - +0.39% +0.35% +0.30% +0.20% +0.15%



Today's Comments (Short Term Outlook)                             Printer friendly

Thought we were confused before?

Stocks were all over the place on Wednesday but ended the day at the high of the day as the Dow closed with another triple digit gain.  I know I have sounded like a broken record with my "better buying opportunity" ahead routine but I had also said something last week that now scares the heck out of me.  I'll get to that in a minute.

I have not been getting very good readings from the normal indicators.  That is, I have not seen an extreme reading either way.  Nothing has said sell now, or nothing has said it is definitely time to buy, so I have sat in the middle stuck on the sidelines. 

The overbought / oversold indicator has not given a decent buy signal since early March.  It now sits in neutral territory but excluding the March signal, every time this indicator moved down to neutral since last summer, it has been a good time to buy.  Can that continue?

                                    Chart provided courtesy of www.decisionpoint.com

 We know the sentiment surveys, both the AAII and our TSP Talk Survey, have not shown excessive bullishness during this rally, and the market continues to climb that wall of worry?  But how long will that last?

Back to what scares me:  I said that I have not had a good feel for what is happening in the market and that I will take the emotion out of the equation and buy when Trader Fred's TSP Trader System moves to a buy signal.  Well, guess what?  We have a new buy signal.

UPDATE: Close of Business Wednesday, May 16, 2007     

Submodel W has given a buy signal. The TSP Trader will make an interfund transfer this morning and enter into the market using Thursday’s close of business fund prices.  The allocation will be 25% in the C Fund, 40% in the S Fund and 35% in the I Fund.  So, Thursday will be the last day in the G fund for the system and the new allocation will be in effect on Friday morning (close of business Thursday). 

The first image shows the C Fund’s Gain-Strength chart. This chart shows what the S&P 500 (C Fund) is doing when there are no Submodel trades. The market’s Loss--Gain has increased (heading to the right). This move in the S&P 500 Index behavior breaks the pattern seen over the past seven market days. The market weakness for this between trade period bottomed out at minus three. 

              

The second image shows the overall market strength (blue line) is below the green line. That means the market has entered a time of market weakness. This chart is a leading indicator of the market’s behavior by at least week or more. In general, it is difficult for the black line (C Fund) to move up when the blue line (market strength) has been flat for a while or is sloping down. The vertical location of the black line has no relationship to the vertical location of the green or blue lines, whose scale is on the left. The C Fund (black line) scale is on the right. 

-- Trader Fred

                       


 I am not crazy about buying here but also I hated the timing of the last buy signal we had, but it turned out to be a profitable trade if you took it - which I did not.  Sometimes these trades only last a couple of days, and sometimes many months.  We don't know what we have here.

So, perhaps it is time to take the plunge, as much as I hate to do it.  As mentioned above, the TSP Trader System will move to a 25% C, 40% S, and 35% I fund allocation.  I will wait and see what happens this morning before I make my final decision.  This is an option expiration week and there is typically one big up day and one big down day.  We may have seen that already this week.  If we do sell-off this morning, I will feel better about buying here.  Buying at another new high?.... not so much.

That's all for today.  I am currently 100% F fund but expect a change.  See you tomorrow.

China Watch
Shanghai Comp:   4,030.14
Recent High:        4,069.85
Resistance:         4,231.00

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