Bulls and Bears

[tsptalk]

This is in response to another post but it's a general response and I wanted to put it in this forum...

Bears always "sound smarter" than bulls. A bear will tell you about all these sophisticated indicators thattellyou why the market won't go up in the face of what is happening (a rising market). I am guilty of thatat times. The bulls argument on the other hand,is usually very simple, a good earnings outlook, low interest rates etc. and a strong economy.Simple, obvious observations and usually right.

After getting out of the market just prior to the last drop I looked like a genius. Then came the humbling part. My overbought/oversold indicator said we were near a bottom. If you remember Iactually got in 25% and said I was going to start "dripping in". But instead I started looking for reasons why the market would give us one more push down. One thing I said was that my indicators are sometimes early, so I decided to wait.Basically, if you are looking for reasons for the market to go down, you will find one. I plead guilty again.

Right now that overbought/oversold indicator is deep into overbought territory. As we saw in January, that doesn't always mean the market is going to come right down. You may get a down day or two, or even just flat action and that indicator can slowly come back down to neutral or oversold without much of a sell off.

So basically, try not to take what you are hearing as gospel. Things look good for the year ahead. If you opted to follow my short term strategy rather than the longer term strategy (The longer term strategy said it was time to get100% in stocks on Mar 24) you are probably not fully invested. Be patient and look for opportunities to get in. There is no need to chase but if we have a weak day or two,maybe get 25 - 50% in. To get back to oversold may take a few days to a week or two.But like I said, that doesn't mean the markets will have to crash to get there.

Tom

[eukrate]

Michael Metz has been bearish for many years. If he says now is the time to sell, it's probably the perfect time to buy. His forecasting record is not impressive..

[NatX]

Tom,

Thanks so much for your input and insight. Yes I should know better than to listen to those guys! Back in August and September many of them were saying the market was going to drop 20-30% and I waited in vein for it. I finally decided to invest some money (outside of TSP) in February just before the correction. :X Just my lousy luck. I'm a great saver but a terrible invester it looks like.

[Wheels]

Tom,

Exactly what does the overbought/oversold indicator measure? Can a stock (or an index) move from overbought to oversold without selling off (say with good earnings)?

Dave

[tsptalk]

It is all based on price movement. The only way earnings will affect it is if it affects the prices of stocks. The indicator can come down without a sell off, just by staying even or an index going up with declining issues outnumbering advancing issues.

I got this from prophet.net ...
The Overbought/Oversold indicator is calculated by subtracting the number of declining issues from the number of advancing issues and taking a 10-period moving average of this value. Because it uses a moving average the value at the beginning of a data series is not defined until the tenth sample. Readings >200 are considered bearish and readings < -200 are generally considered bullish. When the indicator falls below +200 a sell signal is generated and when the OB/OS indicator rises above -200 a buy signal is generated.

A strange thing happened Friday. The NYSE ob/os indicator actually ticked down even though the index it was up big. It might of had something to do with the 10-day period moving average including some of those down days a couple of weeks ago.

Another thing to keep in mind is that a rising ob/os indicator means the market is strong and sometimes you get big moves after you get overbought (or oversold) like we saw in January. That was one reason why I thought we might see "one more push down" when we were oversold last week.

Hope that made sense.
Tom

[tsptalk]

We are almost there. After another strong close Monday, I can feel that I am itching to jump in the market, even though I know it is not the right time. That "get in at any cost" feeling isusually a sign we are near a short termtop. I didn't quite feel the pain Fridaybut today'sit's starting to surface.

I'll call this the Tom's Pain Indicator. ;) It's saying maybe another day or two of upward action before it becomes to tough to be out. Then we will get a sell signal.

Those of you also on the sidelines know exactly what I'm talking about.

Tom

[tsptalk]

More on the overboughht/oversold indicator. Friday the NYSE indicator actually went down and I expect it to go down again today as decliners surprisingly beat advancers both days. Very strange considering how well the NYSEperformed. So this is a case where the ob/os indicator is going down without the market going down. I don't know if this is saying anything about the market's internals but it could be a yellow flag.

[COONDOGCEMETARY]

Tom, six days of gains for me, when would u get out. i am riding on profits, when its go down would u increase ur percentages

thanks

randy

[COONDOGCEMETARY]

outside of the tsp, can one invest in the nasdaq? if so what is a good fund, tom u have any ideas or any one else

[tsptalk]

hopetohititbig wrote:
outside of the tsp, can one invest in the nasdaq? if so what is a good fund, tom u have any ideas or any one else

Here are a couple of ways. Check out the stock symbol QQQ (http://finance.yahoo.com/q?s=qqq). It tracks the Nasdaq 100. I believe it is like 1/40 th the price of the Nasdaq 100. You would just purchase sahres of QQQ to buy.

There are also mutual funds that do the same. Like ...
http://finance.yahoo.com/q?s=NSQAX&d=t.

[tsptalk]

hopetohititbig wrote:
Tom, six days of gains for me, when would u get out. i am riding on profits, when its go down would u increase ur percentages

Hi hope -
We just hit the bottom of a pullback on our way to a good year in stocks. You can sit on it and check your account later in the year and probably be happy. If you are looking short term we are no doubt getting very over bought. The chances of a few down days are getting higher. The kicker is, we coming up on some very strong historical days in the market at the end of this week. But that actually burned me at the end of March. I will talk more about that in my comments on Tuesday.

Tom

[JerBer]

Looks like the S&P and Wilshire have both started off falling this morning! Glad I pulled out yesterday :D!

I know, we are still early in the day but could this be the pullback we've been anticipating?

JerBer

[NatX]

I have a couple questions:

1) Yesterday the dollar was strong again but the I Fund went up. I was expecting it to go down? What am I missing?

2) I wondering about waiting things out in the G Fund (where I am 60%). I know eventually the market will take a down turn. But will it really be enough to justify sitting out for so long? I mean, say the market goes up by 50 points but down only 10 during the correction. You would have missed out on 40 points. How do you know when it's best to wait it outand when tojump in?

[highplains]

I'm 20S, 20C and 60G today. The gains were good over the weekend, but today I'm a deer in the headlights as I see the numbers declining. I missed the deadlline yesterday to hide back in the G fund. Do any of you more experienced (and braver) investors have advice. Do I stay where I am, possibly take a loss on my shares and go to G for tomorrow a.m. or actually increase my stocks in wild speculation???

Thanks Tom, I should have copied all your strategies and waited in the G fund too.

[smine]

Anything new before the cut off? Other opinions?

[tsptalk]

Nothing new for me today.

highplains -
With 60% in G, you are in good position especially if you've gotten some of those gains over the past week or so. We are due for a pullback butyou are better offerring on the side of being too bullish rather than too bearish for the next several months.

[eukrate]

Natx-

I posted this elsewhere yesterday - take a look at the increasing Euro (vs the dollar) and the I fund return(efa).
You can see, like in May 02- Mar 03, the I fund can drop even while the dollar drops. The strength of the dollar is not the main determinant of EAFE, although it is a factor.
http://finance.yahoo.com/q/bc?s=EURUSD=X&t=2y&l=on&z=l&q=l&c=efa

[JerBer]

If it's not a significant factor (the value of the dollar) the TSP has some explaining to do because last week a lot of us lost money in the I fund when it appeared to end the day on a positive note ! ;)

JerBer

[eukrate]

I'm not sure what you mean here. Are you saying the I fund went up and you somehow still lost money? ( Don't see how that's possible). Or that the dollar dropped against some currency and I fund went down (it happens all the time)..