Sunday Update: 03 July 2016

Sunday Update: 100% G Fund Until Further Notice.

While everyone was gearing up for the 4th of July weekend, the market was on a tear.  After Monday’s continued fall due to Brexit, the market rebounded throughout the remainder of the week to finish just under last week’s high!  This was an amazing turn around and goes to show the level of volatility that we can expect over the next several months.

Short Term

The short term chart of the S&P500 (C fund) actually looks very strong.  The S&P found support at the 2,000 price level, roughly the 200DMA, and exploded right past the 50DMA.  The Stochastic still has room to move up, and the MACD and Divergence are both turing positive.  These are all very positive signs.  The biggest technical problem, on both the short and long term chart, is the ceiling at the 2135 price level that we’ve been butting up against for over a year.

Long Term

Because of the big swing this week, the 2yr weekly charts that I have been using don’t give us a broad enough perspective.  The charts below are 5yr weekly and will help us get a bigger view.

The S&P500 has rallied approximately 85% since the low in 2011, which was the first test of the 200WMA following the major lows of 2009.  The opening triangle pattern that began in early 2015 is one of 2 things.  It’s either a consolidation or a topping pattern.  If it’s a consolidation pattern then, when the S&P closes strongly above 2135 on a WEEKLY chart, we will have begun the next major move up.  If it’s a topping pattern, we won’t really know until it breaks below the lower trend line at approximately 1700.  We will be watching the 2135 price level, 50WMA, and 200WMA very closely.

The long term S fund chart is looking pretty good as well.  The S fund found support at the 200WMA and broke up thru the 50WMA.  A close above 87 on a weekly chart would get me back into the S fund.

The I fund chart may be firming up as well.  If the I fund can close above the 50WMA before breaking below the Feb 2016 low, then we’ll be back in the I fund.  The possible double bottom shows promise but the MACD and Divergence are not looking good.

Bottom Line

It was a wild ride last week.  The rally off of the Brexit low MAY be a turning point; we’ll find out soon enough.  In the mean time, there is still no confirmed up trend and lots of downside risk.  The magic number is a close above 2135 on the weekly chart.  If we get that within the next week or two then back in the stock funds.  If not, G fund and no market risk until further notice…

Have a great 4th!

Jerry