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Fund share prices as of: 8/10/07
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Today's Comments (Short Term Outlook)
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So
far, so good The early 200-point decline in the Dow on Friday, reversed and closed down just a modest 31 points. The S&P 500 managed to finish higher. Do you know what this sequence of percentages represents: 0.44%, 1.44%, 1.34% and 4.41%? It happens to be last week's percentage gains for the Dow, S&P 500, Nasdaq and Russell 2000 respectively. That's a little surprising considering the amount of fear still in the air. And again, we are probably spoiled as the S&P 500 is just 6.6% off of its all-time high. We still have not seen a fairly common 10% correction in over 4.5 years - never mind a 20% bear market decline. And now, because of the recent developments in many of the indicators I follow, I'm not sure we'll see a 10% correction this time either, although it is certainly not out of the question given the volatility. You can see below that so far, the low made last Monday has held up. A passed test - if you will. However, we would need to see a move above 1504 before we can say with more confidence that this downturn is over.  Charts provided courtesy of www.decisionpoint.com Although some might say, "It's different this time", we are looking at what could be another "routine" buying opportunity in this current 4.5 year bull market. We had one in March of this year, and one last summer.  I missed the March buying opportunity. I did buy the bottom of last summer's sell-off but I ended up selling way too early underestimating the strength of the market as it climbed up for about eight more months before the March dip. I expect the volatility to continue and we could see more tests of the lows in the short-term, but everything I watch seems to indicate we have a nice intermediate-term opportunity on our hands. We have a few important economic reports this week with the PPI on Tuesday, the CPI on Wednesday, and some housing starts reports later in the week. These could be market movers as investors are still trying to gauge where the Fed is on interest rates. Speaking of the Fed, we had the mixed views on what a Fed rate cut might do to the market. Some said it is what the market needs to stop the bleeding, while others believe a rate cut could be a sign of a bigger problem. The Fed injected the banking system with billions of dollars on Friday and that seemed to sooth the market. The fact that they are not cutting rates could be a sign that they are not too worried - the opposite effect of spooking the market with an emergency cut. We'll just have to see how it plays out and see if any more trouble is around the corner. The bad news seems to be dripping out rather than everyone (the credit companies) being up front. The TSP Talk Sentiment Survey System remains on a buy signal for this week after the survey's neutral 1.61 bulls (52%) to bears (32%) ratio. Trader Fred's TSP Trader System is remains in the F-fund but one of the two F-fund submodels gave a sell signal COB Friday. He also shows another dip in the markets strength chart. Not a great sign. Read what Trader Fred has to say today on his system page. The EbbChart System is in the I-fund today but it's on the move again. Find out more on the ebbchart system page. I am fully invested right now and looking out several months I am comfortable with that. However, the short-term schizophrenia of the market is going to play with our emotions and if downward momentum continues, and we do see a new low on a closing basis on the S&P, I may have to rethink things. Just as the market remained buoyant much longer than I expected earlier in the year, the downside could also be unreasonably drawn out. This is an options expiration week and with Trader Fred's system still on a sell signal for stocks, and the strength chart ticking down again, I may continue to temporarily move in and out of defensive mode after pockets of strength. That's all for today. I am currently 25% C, 50% S, 25% I-fund. See you tomorrow. Have questions? Visit our message board for answers.
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