After last week’s brief pause, the 2019 rally continues… For the week, the C fund was up 2.89%, S fund up 2.30%, and the I fund up 2.76%.
I pulled this first chart from a site early this week. It shows resistance zones for the S&P500 (C fund). After Friday’s close, we are currently just above the top of the first zone and likely headed up to the second resistance zone to test the prior highs.
The 1 year C fund chart below shows that the 200DMA did hold. Monday’s strong move higher continued through the week. We should expect to see the 50DMA cross back up thru the 200DMA within the next week or two. The event is known as the “Golden Cross” and is usually very bullish for stocks going forward.
The S fund was not able to surpass it’s February high but, it appears to have found some good support at its 200DMA.
The I fund had a very significant break thru its 200DMA on Friday. The puts the I fund in a great position to move higher.
Weekly Close with 40WMA Trading Strategy
If you are following the weekly close trading strategy, last week the C fund closed below its 40WMA. This week it closed back above it. Looking at the 5 year weekly chart below, you would have to go back to October 2014 to find the last example of getting out of the stock funds one week and back in the following week. These fake-outs happen but, utilizing weekly charts keeps reallocations to a minimum. Over time, this system will keep you on the right side of the long term trend.
Bottom Line: There are plenty of conflicts in the pattern and indicators right now. We still need to see a successful test of the 50DMA OR a close above the October highs to confirm that the current rally is still in place. We are due for a correction, both long term and short term. The late 2018 correction, followed by the V bottom, was not deep enough to signal an all clear for stocks. Stay alert! Volatility will definitely continue…
Happy St. Paddy’s Day!