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Fund share prices as of: 8/14/07
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Today's Comments (Short Term Outlook)
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Buffett is buying. Should you? And the pain continues. Another triple digit (200+) point drop for the Dow yesterday is bringing out the fear and concern you like to see if you are a buyer. The problem is, fear does not always mark the bottom. There are few more levels of pain to get through. Where are you now on the emotional rollercoaster?  Warren Buffett went on a bit of a buying spree recently. He purchased several companies including a financial stock - the ones that have been getting annihilated lately. His company now owns 8.7 million shares of Bank of America, the second-largest U.S. bank. That is a show of faith in the financials. Buffett says he is not a market timer, but he is a value investor so you have to find it interesting that he added after the big drop. He is finding value out there. That doesn't mean the market will turn up on a dime. He doesn't care about the next 3%, 5% or even 10%. He is looking down the road at the long-term picture. I sure wish I could do that. If I knew for sure that the market was going to be down 0.50% on a particular day, I would probably bail. That's not a great way to invest. But since I don't have the investing talent of a Buffett, I'll take anything the market will give me. I'm not predicting a bottom right here, but yesterday's new lows list gave an interesting tell. While the NYSE fell to another new low yesterday, the number of common stocks that made a new low on the day was just 64 - compared to 300 a week ago Monday. So, the index moved down, but fewer stocks are dropping.    Charts provided courtesy of www.decisionpoint.com You can see in the lower indicator that the 10-day moving average of the high-low differential is at an extreme level. This goes along with the other oversold indicators we are seeing out there. That's not an instant buy signal as the market can certainly continue lower during this dangerous environment. But the odds are improving. Did you notice the recent rally in the dollar? We have a bit of a double bottom now that the late July highs have been taken out.  Charts provided courtesy of www.decisionpoint.com A rallying dollar could hinder the progress of the I-fund. That doesn't mean the I-fund will go down, it's just that a rising dollar will shrink any gain in the EAFE index, or increase any loss. Like stocks, the dollar won't go straight up or straight down. It will chop around and it could be a little overbought in the short-term. If the Fed lowers interest rates we will likely see a fair drop in the dollar. The recent rally could be the result of the Fed staying pat on rates. Trader Fred's TSP Trader System remains in the F-fund and its continued patience has really paid off. Read what Trader Fred has to say today on his system page. The EbbChart System is in the F-fund today as well. It also missed yesterday's big drop. When will it move back in to try to catch a rally in stocks? Find out on the ebbchart system page. RevShark has also been playing the patience game. When I was jumping in with both feet, he was telling us that this market could get worse. He has been very conservative this year and I thought maybe this was another case of him missing a buying opportunity. But he usually has a great feel for the market. He seems to know when stocks moving higher "doesn't feel right" or when a steep sell-off in the market is a technical positive. I don't have this ability. The last two days have been pretty tough on stocks. Monday's early 100 point rally turned into a loss and yesterday was just a slow 200-point move down. That's 300 points and we are now testing the prior lows. We could see a washout type reversal any day now but the question will be, should we sell the rally, or will we be looking at "the" bottom? My intermediate-term indicators are telling us to buy this selling. The short-term is still an uncertainty being run by emotions. I considered selling if we rallied yesterday being that is is an options expiration week which can be more volatile than a "normal" week. But once we started to sell off, I decided against it. History tells us we could see a reversal of a big expiration week down day in the coming days. The market just may stay afloat through Friday but post-expiration Monday's can be rough. We'll have to see how it plays out. That's all for today. I am currently 25% C, 50% S, 25% I-fund but I will continue to take the short-term day-by-day. I won't rule out a short-term transfer out of stocks if something new presents itself. See you tomorrow. Have questions? Visit our message board for answers.
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