Sunday Update: 18 June 2017

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

It was another week of consolidation for the S&P500 (C fund).  The market has been mostly flat for the past 2 weeks with little volatility and relatively low volume.  Classic summer action for the stock market…  Since nothing happened to effect the trend this week, my allocation remains the same at 50C/50G.  As you’ll see in the charts below, there is still room for upward price movement but caution is the name of the game.  We are entering the most challenging time of the year historically for the market and this summer has the potential to be memorable.  

Short Term

The short term chart below is actually pretty strong.  The breakout from a consolidation usually continues in the direction of the immediate trend.  If we combine that with a classic AB=CD pattern, the near term top could be 2500.  First we would need to see a close above 2440.

Long Term

The long term charts also show room for potential upward price movement.  The channel of both the C and S funds allow for higher prices but, the technical indicators are flashing caution signs and we are entering a historically challenging season for the markets.  We could see higher prices over the next month but keep your eye on 19 July.  19 July is often a major high or low for the year. This year it would certainly be a high…

The I fund has not been moving in sync with the C and S funds.  The I fund has enjoyed the biggest gains since the initial breakout following the 2016 Presidential election (about 22%).  The technical indicators show signs of a possible slow down but, we can’t call a top until we see a strong move down.

I don’t like to be 50C/50G this long but these are unusual times.  While I clearly see the possibility for higher prices in the short term, the risk of being fully invested in the stock funds is extremely high right now.  Getting half of the gains as we approach the top is a good strategy since we are also protecting half of our investment in the event of a drastic down turn.  

Please post questions to comments and have a great week!

Jerry