New Allocation: 25% C Fund, 25% S Fund, 25% F Fund, 25% G Fund
The C Fund gapped up through its 10 Day Moving Average (DMA) on Monday, on Big Volume. It’s possible that this move was the beginning of a major leg higher. We need to let the Elliott Wave Pattern play out to be sure. We are back at the top of a 3 week consolidation. The price either goes up from here or continues to consolidate. If the price continues higher, l will add to the stock fund position with my remaining move for May. If the price goes back into the consolidation, I am only 50% at risk.
I am allocating 25% to the C fund as the base line. I am allocating 25% to the S fund at this point because the S fund has been out performing the C fund since the recovery rally began in March. Charts of price ratios are a great tool in determining which funds will give us the best rate of return. You can see in the chart below that the S fund still has room to move higher versus the C fund. Expect to see resistance at 0.460.
The F fund chart looks great. It looks like we got a breakout today from a 5 week consolidation. The only concern is that the price jump was on relatively light volume. We want to see a follow thru day, on big volume, within the next few days. For the breakout to stay intact, the price needs to stay above the 10DMA.
Bottom Line: The charts are calling for a move higher from here. Importantly, the downside risk can be quantified and is minimal compared to the potential upside. I will continue to watch the 10DMA lines of the C and F funds. If prices move higher, I will look to increase my % allocation to the stock funds. We need to see some big price increases on big volume if we are beginning leg 3 higher on the C fund. We will know within a week or so…