Current Allocations: 50% C Fund, 50% G Fund
The first week of 2017 is in the record books and it was actually a pretty active week. On Friday before New Years the S&P500 (C Fund) fell pretty hard thru our 2250 line in the sand, all the way into the 2230s! After the observed holiday on Monday, the markets opened Tuesday with a bang and kept it up all week, running back up to near the 2280 level. In the short term chart below, you can see that we are at the top of this consolidation but have not closed above it. In the long term C fund chart below, you can see that we are butting up against the upper trend line. The market can continue up from here but, It would be much more healthy to see a breather soon. Ideally the consolidation will continue as the 50DMA continues to rise and we get a breakout to the upside when they meet. We’ll see… For now 50% C and 50% G keeps us from taking too big a hit if the market really rolls over, while ensuring that we get some gains if it breaks out.
The short term chart below shows that we’ve been consolidating for the past 3 weeks. Friday’s spike down below 2250 may have signaled a trend change but, the subsequent move up this week may be the beginning of a new rally. We need to see a close above 2280, preferably in large volume, to get more committed into the stock funds.
The longer term (2 year weekly) charts below give us a much clearer view of the “forest thru the trees”. This is the third time that the S&P500 has consolidated at the upper trend line. It is possible that the market continues to rise along that line. The price chart rode the upper trend line for 6 weeks back in July/August 2016 before finally rolling over to a low at the end of October 2016. The S fund is in the same boat, in fact, the pattern is very similar. The S fund price chart did get above the upper trend line briefly but is now consolidating along that line. In both fund charts, the MACD is high and continuing up while the Divergence is flat to headed downward. Odds are that we move downward on a weekly basis from here but, odds are no guarantee…
The I fund pattern is completely different. There is some significant resistance between 59 and 60. The I fund needs to clear this resistance zone before making a legitimate new run up to the prior highs of 64 and beyond. The I fund chart looks very strong at this point. I am watching it closely and will move into the I fund on a close above 60. More to follow if that happens in the coming weeks.
Have a great week and please post questions to comments.