Sunday Update: 04 September 2016

Sunday Update: 50% G Fund / 20% C Fund / 15% S Fund / 15% I Fund.

“Since 1950, the month of September has seen an average decline in the Dow Jones Industrial Average (DJIA) of 1.1%, while the S&P 500 has averaged a 0.7% decline during September. Since the Nasdaq was first established in in 1971, its composite index has fallen an average of 1% during September trading. This is, of course, only an average exhibited over many years, and September is certainly not the worst month of stock-market trading every year.” http://www.investopedia.com/ask/answers/06/septworstmonth.asp

The average bias for September may be negative but, the charts are giving us a mixed bag.  Both the short and long term charts of the C fund look to be rolling over, while the long term charts of the S and I funds have popped above support levels.

Being 50% invested in the stock funds limits our risk in the event of a “Flash Crash” type of event but also allows us to enjoy potential gains that look to be on the horizon for the S and I funds.

Short Term

The 6 month daily chart of the C fund below has been in a very tight range for almost 2 months.  Thursday of this week, the C fund reversed and finished close to the top of the days trading range after hitting the 50 DMA (orange line).  On Friday, the market followed thru but is yet to close above the 2190 level.  The Stochastic, MACD and Divergence are not at extreme levels i.e. non-committal.  A close above 2190 this week would be significant in the short term.

Long Term

The long term (2 year weekly) chart of the C fund is a little more telling.  The price chart appears to be rolling over and the technical indicators are very close to confirming the price move down.  We’ve been talking about and expecting this move down for the last several weeks.  I don’t expect the down move to last long.  I’m comfortable with 20% invested in the C fund at this point.

The S fund had a very strong week, closing at the top of the weekly price range and above the “rail road track” pattern from the last couple of weeks.  This is a strong sign for the S fund.  The next significant resistance should be the 95 level.

The I fund also had a solid week.  It appears to have found support at the 50WMA and closed at the top of the weekly trading range.  The next significant resistance level for the I fund should be around 62 at the 200WMA (red line).

So, a mixed bag.  I like when all 3 stock funds are trending in the same direction; that makes my job much easier.  Now is not one of those times.  The S and I funds are looking strong but the C fund appears to be taking a breather.  Add to that the volatility of a normal September plus this year’s election cycle… No one knows where we’re headed in the short run.

In this environment, I’m comfortable with being 50% in the stock funds and 50% G fund.  Have a great week!

Jerry