TSP weekly Update 11/2/12

TSP Distribution:  C-fund 50%, S-fund 40%, I-fund 10%

Well, well, well !! What a surprise Friday was to a lot of traders. After Thursday big move, even I was thinking that maybe we had re-fired that uptrend engine. I made a post Thursday about that big move and I also made two other comments that if you heeded, no real damage was done. I told you that all three indexes were marked for re-entry points and if you listen that, you stayed out. The entry on the S&P 500 was even marked high risk. Friday morning at the open it looked like we were off to the races and we were going to have follow through but it didn’t last anytime. Almost from the close of the first minute of the open, the market marched downhill all day long.

So Thursday and Friday is why we do not make knee jerk reaction and jump in or out of the market based on just one day of movement. We really need to see a trend and the only thing we see right now is an uptrend fighting to hangon and a downtrend trying to takeover. If you are on the sidelines looking in, that is where you should be. I drew that green re-entry line for a reason and that reason showed itself Friday when things rapidly fell apart in the markets. Do you really want to see a wild two day ride? Click on the little picture at the beginning of this paragraph and look at the 10 minute chart of the S&P 500 look at the movement. That is killer to the Bulls. This put us back into the channel where if we fal through the bottom, I bail. I think we are going to stay in this pattern until after the election.

Speaking of the election and what it will mean for the markets, let me throw out there some of the stuff I have read. In summary, if Obama wins the markets may just start a downward slide because they fear that we will actually do some drastic stuff to tackle the debt. Sounds like the right thing to do and I agree, but the markets are going to hate it. If Romney wins, they believe that he will rollover the Bush Tax breaks and which is good for everything except the debt and the markets will likely rise. I lean to middle, I think the markets will actually just wait and see what Congress and the President does with the Fiscal Cliff and then react to it.

Above are the Small Cap and International Index and there is really nothing to read into these charts because at the moment we are safe. I guess the only negative I could draw on is the Small Cap price is below the 50 day moving average. It also appears that on both charts we are starting to slide sideways, so there is nothing to do but watch.

Conclusion: If your out, stay out. If your in, this is going to be a gut wrenching week watching the market the elections and not knowing which way they are going to bounce. If you have no stomach, Monday is your last chance to bail before the elections. Me? I ‘m going to sit tight and watch because I feel long term, I can still make a move if necessary.