New Allocation: 100% G Fund

The long term Elliot Wave Pattern is looking very strong for new highs by the end of 2018.  Having said that, the summer is likely to get more volatile and the current, short term pattern is presenting some serious resistance.  It is very likely that we will see another correction, possibly down to the 200DMA (2650-2675) before making a final break to new highs on the S&P500 (C Fund).

The chart below shows 2 concepts, first is “Measured Moves” and the second is “3 Drives Higher”.  The 2 thick parallel lines represent moves from the most recent major lows.  The first move was 270 points.  If the 2nd move makes it 270 points, the price will be 2820.  The 3 drives higher (thin parallel lines) make up the 2nd measured move.  Each move on the 3 drives higher is 140 points.  If the 3rd drive reaches 140 points, the price will be 2815.

A Case For Significant Resistance

  • The last major high was 2800.  
  • The measured moves indicate a likely top in the 2810-2830 area
  • Volume during this break out has been very low
  • The I fund is in a similar horizontal consolidation pattern 

Risk Management

My goal is maximize returns and minimize downside risk.  We have seen a nice run up since the last Alert in early May.  It’s time to protect those gains.  Market risk is high from the 2800 level until we get above 2875 and a new all time high.  At this point, the risk of the market rolling over outweighs the loss of potential gains.  I will be looking to get back into the stock funds at the 2675 level or above 2875, whichever comes first.  More to come on this later…

If you have any questions, please post in comments or email.

Jerry