The waiting is the hardest part.

I had considered buying the weakness Wednesday morning but I then thought better of it.  The uncertainty of Hurricane Rita could keep buyers away until they see what kind of damage is done.  Hurricane Katrina hit land on Monday August 29 and the market started to rally on August 31.

The market has been rallying pretty consistently whenever the short term indicators have became oversold lately.  On Tuesday the ARMS index (not the 10-day moving average I often reference here) hit 1.74.  Nine of the last 10 times that indicator closed above 1.50, the S&P was positive the following day.  Well Wednesday we didn't see that rally.  That could be troublesome.  Wednesday the ARMS index closed at 1.50 keeping the market oversold.

If we don't see a rally from these oversold levels quite soon, we may need to rethink our intermediate to longer term outlook.  As I mentioned, yesterday was one of those days where the market probably should have rallied.  Instead the S&P 500 fell below the upper bullish trend line.  I have been hoping for a move to the 200-day moving average (blue line) or the lower trend line.  That should cause some fear but a move below 1200 would give us a lower low. 


                            Chart provided courtesy of www.decisionpoint.com

That would give us a good news, bad news situation.  We would likely rally off that type of a fear driven bottom, but a lower low following a lower high (which we had earlier this month) would make it appear that we are beginning a down trend from a technical standpoint.  In other words the high we made in early August may be the intermediate term top.  By intermediate term I am thinking somewhere between 1 to 6 months.  That hasn't happened yet but it is a definite possibility. 

Both the dollar and bond yields fell yesterday helping out the I and F funds respectively.  Bonds seem to be giving a legitimate bounce off of the 200-day moving average although both of these funds are always capable of giving back recent gains. 

The new AAII Investor Sentiment Survey results are out.  Those bullish went from 51% last week to 39% this week.  The bears rose from 29% to 32%. 

I'm happy in the G fund at the moment but the short term indicators are trying to lure me into stocks for at least a short term stint.  The next two days will determine how I will approach the market next week.  We'll know more about the possibilities of Hurricane Rita as we get closer to the weekend so we must continue to play it by ear.  We could have more severe downside action or we could get a snapback rally, we just don't know.  I'm in capital preservation mode but I realize a rally could be close at hand. 

Administrative note:  I had mentioned a couple of weeks ago that there are some exciting changes coming to TSP Talk.  Possibly as soon as next week, we will have a second daily market commentary columnist. 

To serious traders and market timers this gentleman needs no introduction.  Soon you will know why.  James "RevShark" De Porre is a pioneer in the online trading world.  I have been a fan of his market commentary for close to a decade.  He is currently president of an Investment Advisory firm specializing in actively managed, separate accounts. 

Mr. De Porre will be writing a daily market summary for us called "Around the Reef".  We are still working on some last minute details but this is a done deal.  I am very excited to have James join us as he is one of the most talented and respected voices in the trading world.  Stay tuned for more information.

That's all for today.  Currently 100% G fund.  Thanks for reading.