A nice healthy pullback. Nothing
to worry about.
Yesterday's action in the S&P 500, a .30% pullback, was quite healthy. The Dow fell 44 points following a 400 point rally. That was a needed rest. And take a look where the S&P stopped falling yesterday... directly on top of the old resistance trend line, which acted as support as I discussed yesterday.
Chart provided courtesy of www.decisionpoint.com
So far so good. A couple days of digesting the recent gains is good news. So how is the "dumb money" reacting to this market strength? More good news. They are getting more bearish, not bullish. Perfect. The "smart money" survey I posted the other day showed the "smart money" as being extremely bullish. Take a look at this chart of the new AAII Investment Sentiment Survey (the "dumb money")...
Chart provided courtesy of www.decisionpoint.com
The bearish percentage is back over 40%, a very high reading. As we know, the more that are bearish (believe the market is going to go down) the more fuel there is on the sidelines to buy as they begin to see the light of this new rally. Unfortunately for these folks, once the last few hold outs turn bullish and finally want to put their money back into the market, it will be over. That will be the last of the fuel. That is how we use sentiment. Once again the smart money is buying at the bottom. Buying from the dumb money who are still selling here. I hate that term "dumb money". Maybe I should say, less sophisticated money.
I still believe we are in good shape for now. As you may have seen I made a minor change to my account allocation initiating an interfund transfer yesterday morning going to 65% C, 20% S and 15% I fund. I simply moved 15% from I fund to C. This is effective today (Friday morning).
Speaking of this interfund transfer, I want to share with you an email I received Thursday evening, likely from a new email alert member. This is it in its entirety:
"have you seen todays stock results. your choices were losers for us. i gather you must be a government employee, right?"
Now I don't mind email from people disagreeing with my opinion or unhappy with something I did, but I found so many things wrong with this obvious disillusioned individual's statement, that I had to share it. I seriously doubt that the person who wrote it will read this because there is no way they read these daily market comments.
First, yes I am a government employee. I make that quite clear throughout the site (http://www.tsptalk.com/about_us.html). Second, when I make an interfund transfer it does not become effective the same day. The following day's market action effects my account so you couldn't have been a "loser" based on my transfer yesterday.
The main point is this; I know probably 99% of you understand this site for what it is. For the others, if any of you think that I am trying to be some kind of market guru, or that I have some ability to know on a day to day basis, which days will be up and which will be down, you have me confused with the Psychic Friends Network. If you know so little about the stock market that you don't even understand that it moves up and down regularly, you may not want to try to time it. It can be dangerous to your account. You should probably just observe and ask questions. That is what this site is for. To help people learn, understand and to share ideas with other TSP participants. You can follow my moves at your own risk but the main effort is to get you to eventually be able to understand enough, create your own strategy, and manage your own account.
I am not complaining about this email. It gave me an opportunity to address something that probably needs to be said more regularly. I get these emails from time to time and have gotten used to it. By the way, I also received several very nice, appreciative emails yesterday as well. Thanks. Attitude is everything.
That's all for today. Currently 65% C, 20% S, 15% I fund. Have a good weekend.
Yesterday's action in the S&P 500, a .30% pullback, was quite healthy. The Dow fell 44 points following a 400 point rally. That was a needed rest. And take a look where the S&P stopped falling yesterday... directly on top of the old resistance trend line, which acted as support as I discussed yesterday.
Chart provided courtesy of www.decisionpoint.com
So far so good. A couple days of digesting the recent gains is good news. So how is the "dumb money" reacting to this market strength? More good news. They are getting more bearish, not bullish. Perfect. The "smart money" survey I posted the other day showed the "smart money" as being extremely bullish. Take a look at this chart of the new AAII Investment Sentiment Survey (the "dumb money")...
Chart provided courtesy of www.decisionpoint.com
The bearish percentage is back over 40%, a very high reading. As we know, the more that are bearish (believe the market is going to go down) the more fuel there is on the sidelines to buy as they begin to see the light of this new rally. Unfortunately for these folks, once the last few hold outs turn bullish and finally want to put their money back into the market, it will be over. That will be the last of the fuel. That is how we use sentiment. Once again the smart money is buying at the bottom. Buying from the dumb money who are still selling here. I hate that term "dumb money". Maybe I should say, less sophisticated money.
I still believe we are in good shape for now. As you may have seen I made a minor change to my account allocation initiating an interfund transfer yesterday morning going to 65% C, 20% S and 15% I fund. I simply moved 15% from I fund to C. This is effective today (Friday morning).
Speaking of this interfund transfer, I want to share with you an email I received Thursday evening, likely from a new email alert member. This is it in its entirety:
"have you seen todays stock results. your choices were losers for us. i gather you must be a government employee, right?"
Now I don't mind email from people disagreeing with my opinion or unhappy with something I did, but I found so many things wrong with this obvious disillusioned individual's statement, that I had to share it. I seriously doubt that the person who wrote it will read this because there is no way they read these daily market comments.
First, yes I am a government employee. I make that quite clear throughout the site (http://www.tsptalk.com/about_us.html). Second, when I make an interfund transfer it does not become effective the same day. The following day's market action effects my account so you couldn't have been a "loser" based on my transfer yesterday.
The main point is this; I know probably 99% of you understand this site for what it is. For the others, if any of you think that I am trying to be some kind of market guru, or that I have some ability to know on a day to day basis, which days will be up and which will be down, you have me confused with the Psychic Friends Network. If you know so little about the stock market that you don't even understand that it moves up and down regularly, you may not want to try to time it. It can be dangerous to your account. You should probably just observe and ask questions. That is what this site is for. To help people learn, understand and to share ideas with other TSP participants. You can follow my moves at your own risk but the main effort is to get you to eventually be able to understand enough, create your own strategy, and manage your own account.
I am not complaining about this email. It gave me an opportunity to address something that probably needs to be said more regularly. I get these emails from time to time and have gotten used to it. By the way, I also received several very nice, appreciative emails yesterday as well. Thanks. Attitude is everything.
That's all for today. Currently 65% C, 20% S, 15% I fund. Have a good weekend.
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