Weekly Update: 11 October 2020

This market continues to astound, and confound…  For the week the C fund was up 3.84%, S fund up 5.45%, I fund up 2.80%, and F fund down 0.15%.  The market has been on a tear since completing an A-B-C corrective pattern at the end of September.  Once the market retook its 50DMA, it’s been driving higher ever since.  Volume has been decent over the past couple of weeks and the C fund is well above its 10DMA and 50DMA.  My only reservation is that price did not get down to test the 200DMA during the last correction.  In addition, the RSI never hit the oversold line.  I would certainly have more faith in this rally going forward if price had tested its 200DMA.      

In the 2 year daily chart of the C fund below you can see the gap in price to the 200DMA and the gap to the oversold line on the RSI.  This chart is a bit less of a timeframe than last week where we showed that, when price broke below its 50DMA, it always continued down to test its 200DMA.  An orderly A-B-C correction down to support at the 200DMA would be extremely bullish as we get past the election and into 2021.  

The C fund spent the first 3 weeks of September carving out an A-B-C corrective pattern.  Since bottoming in late September, the C fund has been on a tear higher.  Price is now back above both its 50DMA and 10DMA with the 10DMA line crossing up thru the 50DMA line (Bullish!).  Again, my preference would be that the market roll over and test the 200DMA.  The reality is, there is NOTHING to indicate that is happening anytime soon…

The S fund just put up one of its best weeks of the year!  After a similar A-B-C corrective pattern as the C fund, the S fund rocketed higher this week; taking out its September high.  RSI did hit over bought so, it is possible that a pull back in the S fund could happen in the near future.  It could be rather expensive since the S fund price is so far extended beyond its 10DMA and 50DMA.     

The I fund made it back above its support/resistance line and is nearing the upper end of the trading range.  We really need to see a strong close above the 66 level to get past this horizontal consolidation pattern that we’ve been in since June.

Bottom Line:  I’m holding what I have for now.  I used my first reallocation for the month on 1 October.  That leaves me with one more opportunity to buy into the stock funds IF the market rolls over to the 200DMA.  In the mean time, I am 50% invested in the stocks; enjoying half of these gains and managing downside risk.

Have a great week!

Jerry