Sunday Update: 50% C Fund / 50% G Fund Until Further Notice.
The market may have begun to break down this week. The S and I funds both took pretty big hits, but the C fund is still hanging on. In the short term, the C fund needs to stay above its 50DMA but the technical indicators are all rolling over (see chart below). We look at both the short and long term charts to get a complete picture of the market and try to avoid the daily volatility. Having said that, the short term movements ultimately make up the long term chart. The I fund had a horrible week and we will take a close look at that chart next.
The short term chart of the I fund below is a little busy but, I wanted to point out as many important aspects of the chart as possible. The arrows are all red for a reason. Everything in this chart indicates a continued fall. As noted last week, the I fund was the worst long term chart of the 3 stock funds. In the long term, the I fund was at the top of its downward channel. In the short term, the I fund again tested the 60 level but could not get above it. Thursday’s gap down was followed on Friday with a bigger gap down thru the 50 and 200DMA, with the technical indicators all rolling over. The I fund could find support around 54 but is likely to test the 50 to 52 range, at a minimum, before it sees 60 again.
This week the C and S funds both produced a “Shooting Star” chart pattern. The C fund opened at 2100 and got as high as 2120 before rolling over and finishing just below 2100 for the week. The S fund opened at 86.75 and got as high as 88 before closing the week at 86.0. This pattern often indicates a top.
Again, the I fund chart is the worst of the 3 stock funds. This week the I fund took out all of the gains of the past 3 weeks before pausing at the recent support level of 57.
Both the short and long term views of the market are not looking good. If you do not follow the market closely, or are going on vacation, I would suggest moving to 100% G fund at this point might be a good idea. It’s much better to lock in the gains of the past few months than to come back from vacation with heavy losses.
If we get a follow thru day to the downside this coming week, I will be moving to 100% G fund. This could come as early as Monday so, if you’re staying in the market, watch closely… Please post questions to comments.
Have a great weekend.