Well I took a weeks vacation and I also read a couple of books to add to my arsenal of weapons. After I did a little bit of back testing, I have come to the conclusion that instead of working with the 50 week MA, I will now use the 30 week MA on the weekly and the 30 day on the daily. There is also a Advance / Decline line that will give us some early signs that things might be changing for the good or the bad. Basically it is figured by subtracting declining issue from advance issues and you add it to the previous day to show a trend. It is either going to go up or down. How to use it? If the S&P 500 price is going up and the A/D line is going down, it is a good sign that market will reverse course very soon. Lastly, I will be using the S&P 500 data exactly from now on to reduce confusion on numbers here and numbers reported in the press.
Looking at the Weekly chart of the S&P 500, I want to congratulate any who got back in the week of August 30th or September 6th. The 6th was almost a perfect re-entry. The green trend line drawn a few weeks ago is holding nicely and price is actually accelerating away from it and the 30 week ma. The 30 week ma and the RSI are both rising, which is another plus. The only negative that can be pulled from this chart is the A/D line this week was a negative. It takes more than one week to make a trend, so we will know nothing until next Friday. No reason not to be in the C-fund or buy stocks outright based on the weekly chart.
The Daily chart is not looking bad either, but the first thing I want to explain is this. When price goes through and hold above a RED resistance line, that line now becomes support. I will change the color to Yellow and it’s title to reflect the change. Next, the bright blue line is the 30 day and dark blue is the 30 week and is there for reference. When going back in time, I notice something pretty cool here on this chart. If the 30 day ma starts leveling out and if price touches it at all, the RSI and the MACD normally start flashing warning signs long before the weekly confirms.
So let’s review this weeks daily chart knowing what we know now. The last week of August we bounced off Major support 7 times and started marching north. By September 3rd, price, RSI, and MACD all turned positive, but the 30 day ma was still going down. September 10, everything on the daily chart was screaming to re-enter the market. But there was a but. We knew that 1131.23 on the S&P 500 was a resistance line that we had bounced off 9 times, so personally I thought it was a waste of time to get back for that short of a move. Finally September 20th we broke through resistance, but it didn’t hold. You could have still taken that entry based on the rest of the indicators and eventually it did hold. For the next 10 trading days the S&P bounced off 1131.23 before it finally started working it’s way up to the next resistance line. October 13th, we broke what is almost the last resistance line on our way to 1219.13. I got back in to the market last Wednesday based on all my new info and the info that is staring me in the face. I believe that we will reach 1219.13 because there is nothing in between to stop it and earning season is here. I think the majority of companies will show good earnings, just as they did a quarter ago. This has been a very tough Summer to make calls in my retirement account and stocks out right. Once moves were thought to be going in one direction the market would suddenly snap back the other.
Is there concern? Of course there is. The Government is spending us into a hole that I do not believe 2 generations will be able to dig out of. But, if the market is going up, cash in while you can and bail out when things get nasty. I also believe the S-fund or small caps is another fund that is running nicely and I put money there. The I-fund or European is about to reach it’s overhead high and if it goes through that, then I see no reason why you should not invest there also. There has to be a pullback soon, just for health reason, so I would not be surprised to see one soon. But the deeper we get into earnings season, the less likely it happen until later.
If at anytime price on the daily chart touches the 30 day moving average and at the same time the 30 day ma is smoothing out, MACD and RSI are negative, I will likely pull my monies back to safety. To much to loose.
TSP distribution: C-fund 35%, S-fund 35%, G-fund 30%
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