Monday's weakness carried over into yesterday in a big way and the minutes from the August 7th  FOMC meeting did little to stop it as most of the major indices lost over 2% on the day.  It's always a nice little bonus to see some green in the F or G funds when the market is getting hit hard and you're on the sidelines.  We dodged a big bullet yesterday.

It was one of those days where Trader Fred's TSP Trader System, the EbbChart System, and the Sentiment Survey System were all on the sidelines in either the G or F fund - and it paid off.

The S&P 500 finds itself back under the 200-day moving average as the 50-day moving average was again the resistance to the attempted rebound. 


                                    Charts provided courtesy of www.decisionpoint.com

I don't know if the S&P is going to move all the way down and test the lows made a couple of weeks ago, just before the Fed stepped in and cut the discount rate, but that would be a nice clean place to bottom out, but will it be that easy?  Probably not.  We could rally straight up from here and those of us on the sidelines would be left behind again, or the market could punish anyone trying to pick a bottom by plunging below the prior low.

I'm not an expert in foreign currency but I keep hearing about the carry trade and how it important for the yen/dollar exchange rate to stay above the 114 level.  It has dipped below a few times but rallied right back.  Last night we started to see the 113.90's again and Japan's Nikkei 225 is down over 400 halfway through their trading day as I write this.  We saw an unwinding carry trade scare two weeks ago as well and the the Nikkei dropped over 900 points in one night.  That's when the Fed stepped in and cut that discount rate and all was well for a while.  What happens this time?

Obviously the market is in a tough position in the short-term.  The intermediate-term indicators are looking good and as we talked about a couple of weeks ago, trying to buy this dip could bring with it some short-term pain, but looking out several months it very well could show up on the charts as a place we should have been buying. 

Trader Fred's TSP Trader System remains in the F-fund and is still using words and phrases like "worrisome" and "cautionary behavior."  Read what Trader Fred has to say today on his system page.

The EbbChart System continues to bounce around with precision timing.  As I mentioned above, the EbbChart was out of the market yesterday after making some big gains last week.  Find out where the ebbchart system page goes next.

We could be in a situation again where it will be the Fed stepping in and putting a stop to the short-term pain.  With the TSP trading delay, it will probably be tough for us to time it just right (unless maybe you follow the Ebbchart system).  If the market tests the prior lows and fails, we could be looking at a longer recovery period.  If it tests and holds, I will be ready to jump on board.

We do have that very strong Friday before Labor Day weekend bias.  If the selling continues today, the odds would favor another bounce toward the end of the week making Friday a possible nice one day play in stocks.

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

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