A look at bonds and
1995
Stocks continued to rally on Quadruple Witching
Friday and it is getting difficult to not believe in
this market. That is until the next downturn.
It seems every time the indices drop I find myself
saying, "this is it!", referring to a decent
pullback - only to see things turnaround within
days. This type of action is rare but not
unprecedented. My experience tells me that the
market will eventually sell-off, but the overly
bearish surveys keep trying to tell me it is 1995
all over again.
Here is a chart of the S&P 500 for 1995 and half of
1996. 1995 saw barely a wiggle as the C-fund
was up over 37% that year. Finally in 1996
things became a little more volatile as we know
stocks are not supposed to go straight up.
They need to stop to refresh and reload once in a
while. And even though the C-fund was up
nearly 23% in 1996, there were many chances to buy
during the volatility, including an 11% dip during
the summer months.
Chart provided courtesy of
www.decisionpoint.com
One might argue that we have had our correction in
February, but we're only talking 6%. A
correction is actually considered a 10% or more
drop, something that happens almost once per year
and, as as I have mentioned many times, we have not
had one in over fours years now. By the way,
last week marked the one year anniversary of last
year's market low.
Chart provided courtesy of
www.decisionpoint.com
Longer-term, I think this market has plenty left in
it but that doesn't mean we won't eventually get a
correction. The
TSP
Trader System seems to be detecting trouble
ahead.
Bond have really pulled back lately and while I
stepped away from bonds in an attempt to avoid any
type of severe sell-off, it looks like it may be
time to buy again. This bond indicator score
from sentimentrader.com shows us that things may be
overdone on the downside. Only in 2004 did
bonds sell-off significantly more after a move into
the green zone. The inflation related reports
may be the key here.
Chart provided courtesy of
www.sentimentrader.com
The thing is, if bonds do rally, it will probably
pay off more for the stock funds. That is
unless a rally in bonds is more of a flight to
quality rather than a drop in rates due to a
weakening
economy and benign inflation readings. If the
bond market sells-off further, stocks will likely
sell-off with them.
Our
TSP Talk Sentiment Survey system is 100% S fund
again this entire week.
The EbbChart System
is back into the I fund today. Read more on the
ebbchart page.
Trader Fred's
TSP
Trader System remains out of the market.
His data is showing signs of some short-term trouble. Read
Fred's current `commentary on the
system
page.
That's all I have for today. I am currently 100%
G fund. See you tomorrow!
|
China Watch
Shanghai Comp: 4,254.87
Recent High: 4,335.96
Resistance:
4,231.00 |
Today
+2.95%
as of 12:30
AM
ET |
Printer friendly