Summer's over.  Let the games begin.

Typically the week prior to Labor Day weekend is one of lackluster volume as many Wall Street pros, and any other working person for that matter, take some vacation time.  Last Wednesday and Thursday saw a respectable rally on very respectable volume.  Friday saw a little pullback on lighter volume.  Nothing wrong there. 

Now everyone is back to start what is historically the weakest month of the year.  I had mentioned some almost meaningless short statistics of past Labor Days (see Friday's comments below) but the market hasn't really followed any script lately.  What we had last week was a very oversold market, combined with some seasonally strong days prior to Labor Day which enabled me to catch some of that rally.  This morning I am back on the sidelines looking for more information.


                        Charts provided courtesy of www.decisionpoint.com

I have continued to state that were due for a bounce that may end up being a trap.  Sort of the reverse of the market action we had in late June / early July.  At point "A" above I had moved to 100% G fund.  The market quickly dropped to point "B" only to rebound strongly only a few days later.  Could we see the opposite here?  I jumped in the market Wednesday morning, we get a big rally, then what?  Will this rally fail now?  Will point C be the inverse of point "A"?

I had a feeling the market would break one way or the other this week and I decided to take the safe route by going back to the G fund.  It may turn out to be the wrong move considering how oversold the market had become, but I just wanted to be safe just in case the aftermath of Katrina had a negative surprise for us over the long weekend.  We now face record high gas prices and a huge task of cleaning up the devastated cities of the Gulf Coast.  Who knows how Wall Street would react this week?

Again, if you want to get the most of the reward, you have to be willing to take on the big risk.  I wasn't willing to do that on Friday and so now I find myself on the sidelines again.

I had mentioned how many of the indicators had hit points that indicate a short term bottom.  It was almost too perfect, ala the June 15th top.  Even the sentiment polls are almost too perfect.  Our TSP Talk Sentiment Survey had over 2 to 1 bears to bulls.  Unless we are the smart money rather than "the herd", this is a bullish sign for the market.

 For the week of 9/06 - 9/09...

Bullish (up)	27%
Bearish (down)	58%
Neutral	15%

            
Maybe I am ignoring the obvious.  If it looks like a bottom, and smells like a bottom...   but I want to be sure.  I still did not really see any fear, pain, or depression that usually accompanies a market bottom.  This is a case of better safe than sorry, better late than early.  It will be difficult to resist if the market rallies here and I won't for long if that does happen. 

This is not a similar situation to my defensiveness in earlier this summer.  The indicators are in much better shape now after the 4 week drop.  It is just a matter of picking your spot and doing what is comfortable for you and your account.

That's all for today.  Back to 100% G today.  Thanks for reading.