We just had a VERY brief correction down to the 50DMA. With respect to the S&P500 (C Fund), the entire correction only lasted 4 days from the all-time high in January. During that time, the price of the C fund collapsed down through the 10DMA and found support at the 50DMA. 2 days after finding support, the C fund was back above its 10DMA. This type of brief correction is very unusual. As you can see in the C fund chart below, when price broke down below the 10DMA in September and October, it consolidated and broke down pretty significantly through the 50DMA. This weeks’ correction found support at the 50DMA and recovered immediately.
The first couple days of the recovery were on significantly low volume. In addition, the I fund and the Dow Jones Industrial Average (DJIA) could not get back above their respective 10DMA lines. Because of this, I wanted to give price another day to ensure the support at the 10DMA would hold. In the C fund chart below, you can see that today’s price move was significant following yesterday’s test of the 10DMA. Today’s move was also on bigger volume than yesterday. This greatly supports the analysis that price will continue to move higher.
In the DJIA chart below you can see that today was the first break higher out of the downward consolidation. In addition, price closed above its 10DMA for the first time since the correction and the move was on higher volume than yesterday.
Bottom Line: Market risk is now on our side. Prices are all above their respective 10DMA lines (although the I fund is barely above). Please keep in mind that this reallocation was our first of the month. IF the market rolls over and we get out, we can’t get back into the stock funds again until 01 March. The rules are what they are. We will do the best we can within those rules and hope the market cooperates…
It’s going to be a busy weekend! Don’t forget to tune-in for the Weekly Update Show that will post at 6:30PM on Sunday AND the monthly Members Only webcast, as well as the Weekly Update Newsletter.
Have a great weekend!