The spring sprang

Thursday's early 50 point drop in the Dow was just what I wanted to see.  The breakdown looked to be the precursor to that one last push down I have been waiting for to get back into stocks.  Instead, the market reversed strongly to the upside and the Dow and most major indices were up to the tune of about 1%. 

I don't look at this as a positive for the market.  As a short term play this is not much of a surprise as we were seeing some serious signs that the "dumb money" was starting to give up after being so bullish.  The AAII Investor Sentiment Survey now shows bears leading bulls 39% to 32%.  That's a positive for the market.

But for the longer term, there was not enough damage done.  After all of the recent activity; rising interest rates, rising gasoline prices, rising heating oil and natural gas prices as we head into the colder months, earnings slowing because of the above, the S&P 500 is just 1.3% off the highs made two months ago.  No fear.

Some may look at that as a positive, but a market that doesn't consolidate, doesn't have the strength to make a strong move up.  So, any move higher from here will be short lived in my opinion. 

In RevShark's market summary yesterday, he talked about how this type of action smells a lot like end of the month window dressing.  Now that he manages money, he is seeing first hand what that is all about.  It's an interesting read.

The end of September is historically weaker than normal yet the market is holding, and moving higher.  The first several days in October are historically very solid.  Will that buck the trend as well or is this market really this strong?


                      Chart provided courtesy of www.sentimentrader.com

I know I have inundated you with the 1994 chart comparison, but I don't want you forget the volatility that accompanied that chart.  We seem to be in, or just prior to,  that red box below.  My recommendation the other day was to buy weakness and sell strength.  These enticing rallies like we saw Thursday can make it easy for you  to forget your plan.


                      Charts provided courtesy of www.decisionpoint.com

I don't know if I am setting myself up for missing the boat again.  I also don't know if the market will rise for another day, or another month, but I do believe we will see a better opportunity to buy for the long term.  Taking a short term stab at stoks now might pay off or could burn you.  That is the personal risk/reward struggle we all have to face.

That's all for today.  Currently 100% G fund.  Thanks for reading.  Have a great weekend.