Sunday Update: 16 April 2017

Current Allocation: 50% C Fund, 50% G Fund

Happy Easter everyone!  The market was closed on Friday for the holiday weekend so investors will have to sit on their hands for 3 days until Monday.  In the current environment a lot can happen in 3 days.  The market is consolidating generally sideways so, we stay at 50% C Fund and 50% G Fund for the time being.  Having said that, we are very close to my line in the sand.  See below…

Short Term

On Thursday the market made a pretty decisive move down below the 50DMA.  The S&P500 (C Fund) fell 0.68% and the indicators turned decidedly down.  On the positive side, volume was relatively light and the price did not undercut the most recent intra-day low of 2322.  We have been 50% C Fund and 50% G Fund for the past 3 weeks, ever since the current consolidation was confirmed on 20 March.  The goal is to minimize the potential downside loss if the market really rolls over, BUT also catch some of the upside if the market turns quickly back up.  The current daily chart looks much more like a consolidation than a market in the process of seriously rolling over.  Having said that, we have to draw a line in the sand somewhere.  Any daily close below 2320 will generate an Alert to 100% G Fund.  A close below this level gets more significant when we look at the Long Term below…

Long Term

On the long term chart as well, the C fund appears to be consolidating (vice rolling over).  Since the most recent rally began in February 2016, the weeks where prices moved up far out numbered the down weeks.  More importantly, during positive weeks, prices rose significantly in high volume.   On the down weeks, prices receded minimally and on low volume.  I don’t want to move to 100% G Fund too soon and miss a potential big move to the upside but, if the market shows signs of a significant roll over, we do want to get out.  The market is priming for a big move one way or the other and we are positioned as well as possible for it.  Next week could be the game changer…

The long term chart of the S Fund is also behaving more like a consolidation than a significant roll over.  Similar to the C fund, the S fund made a low 3 weeks ago but shows a pretty tight consolidation for the past 6 weeks.  Big moves tend to come from tight consolidations.  Again, next week could be a game changer.

The I Fund has met some resistance at the upper channel line but has not rolled over.  It had a big run up since the election and is taking a breather at this point.  Right now there is no cause for alarm.  I am looking for the I fund to test the prior high of 65 before a meaningful roll over.  I’m cautiously optimistic here…

Being on the winning side of a consolidation can be very tricky, especially given the restriction of the number of reallocations we can do each month.  Since we have not made any reallocations yet in April, we are in a great position to take advantage of the next significant market move.  When this consolidation ends, the next move is likely to be big so please watch for Alerts!

Have a great week!

Jerry