Sunday Update: 100% G Fund

Week 1 of November is in the record books and the market looks like its finally starting to move.  The S&P500 (C Fund) has been down everyday for the past 9 days.  This is the longest losing streak since 1980 and has only happened a handful of times since the 1920s.  This doesn’t mean that the overall market is getting ready to fall off the cliff (necessarily), but it’s an interesting fact.  We did see some potential support at key moving averages.  The C fund came right down to the 200DMA and the S fund came down to the 50WMA.  What we did not see is any sign of capitulation.  Capitulation happens when buyers finally throw in the towel, lots of selling takes place, and prices plummet.  This is when we know the end is approaching.  So far the selling has been  very orderly.  I would expect it to get significantly more aggressive before this round of selling is over…

Possibly the most important chart of the week is the short term I Fund.  The I fund had been forming a complex Head & Shoulders (H&S) top pattern over the past 3 months.  On Friday, the I fund gapped down thru its 200DMA and thru the “neckline” of the H&S at 57.  Based on this pattern, we should expect to see the I fund fall to 54 at a minimum.  The stochastic indicator is very oversold at this point but, it can remain there for a long time.  When both the blue and red lines are back above 25, this would be an indication to possibly get back into the I fund.

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Short Term

As expected, the C fund broke down thru the floor of its declining wedge pattern.  It did find some support at the 200DMA on Friday and the indicators are very oversold on the daily chart.  I would not be surprised to see prices jump a bit next week (possibly as high as 2120) before pushing lower thru the 200DMA.

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Long Term

From the weekly perspective, the rate of selling is picking up on the C fund.  The C fund closed the week below the 2100 support level and is just above it’s 50WMA.  After the 50WMA, the next possible support level is 2000.  It may or may not take a couple of weeks but, I would expect to see the 2000 level tested relatively soon.

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The rate of selling is also picking up on the S Fund.  Like the C fund, the S fund found support just above its 50WMA.  The next possible support for the S fund is 80 and I expect it will test that level relatively shortly.

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The I Fund is actually in pretty bad shape.  The chart clearly shows a horizontal channel between 52 and 60.  If the I fund can’t get back above its 50WMA, it is very likely to go back down and retest the 52 level.  The technical indicators show lots of room for further downside movement so, my expectation is we will see at test of 52 in the coming weeks.

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We have a very important election coming up next week.  The fact that we have to choose between these two candidates is completely unacceptable but, it is what it is…  Regardless of who wins the election, there is a real chance for some big swings in the market next week, or not.  Either way, the G fund is the place to be while we watch the show play out and see how the markets react, not just in the US but around the world.

Have a great week.  Post questions to comments and please SHARE!

Jerry