|
|
|
Fund share prices as of: 8/08/07
|
Today's Comments (Short Term Outlook)
Printer friendly |
|
Scared
money After hours of steady, solid gains, the market got a late scare and those gains completely evaporated. After rallying nearly 200 points from 9:30 AM ET until 2:30 PM, the Dow gave back all of those gains and actually went into the red during the next hour of trading. Then, during the last 20 minutes of trading, the market was able to rally back strongly as the Dow closed up over 150 points. Simply amazing - but scary.  There was a rumor involving Goldman Sachs, one of the most powerful financial institutions in the world, and that may have caused the panic selling. But it turned out to be untrue and the market resumed its rally. Again that is a scary thought. This market, which looks very good in the intermediate-term, is ready to sell-off on any negative news headline. The new shorting rule which started in July (traders no longer need to wait for an uptick in a stock to get filled) may be one of the reasons for these quick downdrafts. So if you are invested, put on your hard hats. When markets correct, the bottom is rarely clean. There is give and take, push and pull, rallies and declines, but if it is just a pullback and not the start of a bear market, the end result will be higher prices in the coming months.  Charts provided courtesy of www.decisionpoint.com Notice the PMO indicator along the bottom. Unless it's "different this time", we could very well be looking at a great buying opportunity. That doesn't mean that we won't experience wild swings in the meantime. There is a major battle going on with the bears and the bulls and right now there are more bears out there. Almost everyone I read is expecting more selling. Maybe that means it won't come? We could get more weakness but I now believe we have seen the low, or at worst we could see another test and a hold. Trader Fred's TSP Trader System has a big surprise for us today. We have a buy signal - but not in stocks! He has been working on, and had success monitoring, some F-Fund submodels. Read more of what Trader Fred has to say on his system page. The EbbChart System is out of the market today but we have a contrarian signal for Friday. Find out more on the ebbchart system page. Again, I am bullish but I want to stress that we could still experience some short-term pain. How I play that I don't know yet. I will take it day by day, but I want to err on the side of being too bullish. If I step aside it will only be for a day or two. We've seen this market turn on a dime more than once intraday and that makes it very difficult to trade given our TSP situation. That's all for today. I am currently 25% C, 50% S, 25% I-fund. I will leave you today with the intermediate-term indicators I posted yesterday to reiterate the reason I am now very bullish. ------------------------------------------------------------------------------------------------------------------ 08/08/07 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.  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. Have questions? Visit our message board for answers.
Would you like to be on our
email alert list?
We will send you an email when there is a change to our asset allocation
or market outlook. Your email address will never be given out.
Read our
privacy policy. By signing up
you agree to the TSP Talk
Terms of Service. More details below
**. Like what you're reading? Tell a Friend about us. |