New Allocation: 50% C Fund, 50% G Fund
The market has exploded off the December low and is now back above it’s 50WMA. This is a critical technical level. If the C fund can stay above it, the line will turn positive and we will soon be testing the October highs! That’s the good news. The bad news is that we have seen 8 strait weeks of higher prices at an unsustainable rate. At some point, this rally will need to take a break. The 3 year weekly chart below shows that there is still room for prices to move higher before hitting over-bought levels. While on the daily chart, we are already at extreme over-bought levels.
Take a look at the Wm%R in the 3 year weekly chart below. Once the indicator turns green it can stay there for a long time as prices continue higher. Watch this indicator on a weekly basis. If it rolls over and closes above 20, market risk increases.
The short term chart below is looking very strong. I really like that both the 200DMA and 50DMA are turning positive. As long as the 50DMA continues to turn up, it will eventually cross the 200DMA to the upside. This will be very strong confirmation of a continuation of the long term rally.
In the short term, we have come too far too fast and that worries me. If you look at the Wm%R in the daily chart below, you can see that we’ve been in the green for a relatively long time and RSI is topped out. We are overdue for a pull back. Having said that, I have to respect the moving average lines. I want to see the market pull back to the 50DMA and bounce off that level. That will be my indicator to get fully back into the stock funds. In the meantime, 50%C and 50% G reflects the current market risk.
Please post questions to comments or email. Have a great week!