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…

Stay alert!

Jerry