Current Allocations: 50% C Fund, 50% G Fund

There are a small handful of possibilities for how the stock market plays out over the next few months.  The bottom line is, while we are nearing a major top, we’re not there yet.  All indications point to a relatively shallow correction thru the summer with another push higher into the fall.  My plan is to stay 50% C / 50% G until the summer low is confirmed, then go 100% stock funds to the final top.  However, this is not an exact science!  I will continue to adjust as the market dictates…  Let’s take a look at the big picture and then dial it in.

Very Long Term

The 10 year monthly chart below shows the clear 5 legs of the rally that began after the low of 2009, and what the ideal correction would look like over the next several years.  We are nearing the end of the 5th leg that began following the low in 2016. While there are no guarantees, the best count shows continued upside thru 2017.  Once the top is confirmed, we are likely in for some difficult years ahead…  

Long Term

The 2 year weekly chart below shows a close up of the 5th leg from 2016 to present.  The 5th leg is also playing out in 5 steps.  The most likely scenario over the summer is a correction down to the area of the 50WMA (around 2325-2350).  This will complete the 4th step and allow the market one final push higher into the end of 2017.  Again, this is still a probability as step 3 has not yet been confirmed.

The S fund chart is similar to the C fund.  We would expect to see the S fund come down and test it’s 50WMA, along with the C fund, before pushing to new highs later in the year.

The I fund chart is a bit different.  We would expect to see some consolidation over the summer but not a pull back all the way to it’s 50WMA.

Short Term

In the short run, the market appears to be topped out and ready to begin a correction/consolidation.  We need the S&P500 to break down below the 2400 support level and the 50DMA to confirm step 3 of the larger 5 leg.

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Happy 4th Weekend!

Jerry