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Fund share prices as of: 8/07/07
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Today's Comments (Short Term Outlook)
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Which
way now? What can you say? The volatility has been amazing; something that has been lacking for a long, long time, is back with a vengeance. We saw another 250 point swing in the Dow, and it was not as volatile as the S&P 500. I went into yesterday hoping the market would sell-off on the Fed announcement. When the Dow opened to the tune of a negative 100 point loss, I knew I was going to make the move. The intermediate-term indicators are just too good and I didn't want to wait too long to get long, or I could miss the opportunity I have been waiting for. By the time I sent out the email alert that I was moving to 25% C, 50% S and 25% I-fund, the Dow was still down about 75. So far so good. By the time the noon deadline came around the Dow started to peak into positive territory. "Not again!", I thought. By the time the Fed was ready to make their announcement the Dow was up higher and the S&P and small caps were really climbing. Then came the announcement and the floor fell out from underneath the market. Yes! Back into another a triple digit loss and things were looking good for buying into a lower market - if only the losses would hold. But they did not. The Dow shot up from a115 loss to a 135 point gain in short order before closing up 35 points. Again, the S&P and small caps did much better.  So, I am now fully invested and unfortunately, we're probably a little overbought in the very short-term. It wouldn't surprise me to see some red numbers in the indices at some point in the next couple of days. But of course, that is just par for the course these days. Let's take a look at some of those indicators that are looking so sweet for the intermediate-term. It's been a long time since we've seen such a confluence on the buy side. I hope your bandwidth holds up - lots of charts ahead. The first indicator below the S&P 100 chart is the overbought/oversold indicator. It has been moving up during the past two days' rally but it is still in oversold territory.   Charts provided courtesy of www.decisionpoint.com The put/call ratios look good too. The 10-day moving average of the smart money OEX put/call ratio, is as high as it's been all year. The smart money is lightening up on their puts (bets against the market).  Charts provided courtesy of www.decisionpoint.com The 10-day moving average of the CBOE put/call ratio is now near multi-year lows. The dumb money is now betting against the market as heavily as they have since this bull market started in 2003.  Charts provided courtesy of www.decisionpoint.com The 10-day moving average of the ARMS Index hit the magical 1.50 level the other day. Other than the anomaly we saw February/March of this year, the 1.50 area has historically been a very good intermediate-term buy signal.  Charts provided courtesy of www.decisionpoint.com The Rydex Cash Flow ratio, which compares how much money is in bearish Rydex funds and money markets, to how much is in bullish funds, turns overly bearish. The 1.10 ratio is a point where the market has tended to bottom out from any pullback.  Charts provided courtesy of www.decisionpoint.com One other thing, take a look at the smart money / dumb money confidence level chart from sentimementrader.com. Not much explanation needed. The smart money is optimistic and the dumb money is nervous. It happens during every pullback/correction. 
Chart provided courtesy of www.sentimentrader.com When you take a look at this chart from thechartstore.com of this current bull market going back to early 2003, it shows that each time the market has pulled back 6% to 8% area it proved to be a very good buying opportunity. I missed my chance in March.  I know - we still haven't gotten a 10% correction and I'm a little bummed about that. We could still see it if we have a test of the recent lows, but I'm looking for this to be a good place to buy if you are looking out more than a month or two. I had moved to a 100% stock allocation in our hypothetical longer_term inactive account (for those who are more into buy and hold) last Thursday still anticipating some short-term volatility. The first day did not pay off as the Dow lost 280 that day. Figures. But those gains were quickly recovered in the last two days. I am a little disappointed that Trader Fred's TSP Trader System has not given a buy signal yet. Whatever it is looking at is not confirming what my indicators see. Perhaps a retest of the lows will do the trick. Read more of what Trader Fred has to say on his system page. The EbbChart System is back in the I-fund today. That sounds good as I believe there is some decent fair value coming its way today. Find out where the system is going next on the ebbchart system page. The fact that the S&P 500 is up about 3.5% in the two days has me concerned for the short-term. I think we will be fortunate to escape the rest of this week without a loss in the stock funds. Looking out 1 to 5 days - not so excited. Looking out 2 to 4 months - priceless! 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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