This week I’m just going to jump right into the charts and whatever I have to add, I will add in my conclusion at the bottom.
Since the S&P 500 hit the high of $1849.44, it has been stuck in an consolidation channel. Support is now very clearly setup at the $1827 level. That level has been tested 7 or 8 times and every time buyers have defended. The more times support is tested the more likely it will breakdown and prices will sink. So sometime very soon I’m hoping when that break happens, it is to the upside. There is no percentage of times that it works to the positive or negative, but this I do know, it will happen soon. I recently added the monthly long-term bailout line to the daily charts just so the daily watchers and monthly watchers can see the same things on one chart. I will still do my monthly post on the last trading day of month for my long-term investors.
Now, if the Small Cap is an indicator of what is about to happen to the S&P, then things are good.
As messy as last week looked to me, the Small Cap finished the week closing at an all time high. I bet you didn’t see that coming! But what is really important here is that the same tight channel that the S&P 500 is in, the Small Cap broke out of it Thursday and Friday. I’m hoping that the Small Cap is the leader and the rest of the markets will follow suit.
The International so far this year has been a disappointment to me because I hoping that it was going to lead for the first month or so. If you remember back when I made my post on December 28, 2013 here, and you scroll down to the International chart, I made the statement that prices should march up until it hits $70. Well since that point prices fell to the $66 to $65 level and have been firing CBL sell warnings. Friday, prices snapped back to the upside and cancelled all warnings. With that close Friday it created a higher pivot low, so uptrend structure is once again supported. This is good. I think next week making a new high is going to be very important here, so I will be watching closely.
Bonds as it turns out are the surprise of the week. There was no indication whatsoever that a trend reversal was close. But Friday there was a powerful move to the upside and two things happened at once. First and the most important is that the down trend line that has been running since October 30th was broken. Price also closed above the 50 day moving average. We have had 9 trading since October 30th, that price closed above the 50 day moving average, but each time price faltered and continued downhill. So 2 important buy signals have fired. So what’s left? I didn’t draw the line on the chart but I did point it out. Price needs to close above the $107.10 level and then follow through the next trading day prior to 11:30am. Personally I do not think price will hold here but knowing that we are bouncing around the bottom of price structure, a reversal should not come as a total surprise.
To the left is the monthly price chart on Bonds. What I want to show you here is that price still has a bit to go before long-term investors get a buy signal, so be carful going all in on Monday. The overall trend using the monthly chart still looks ugly. I just wanted you to see what I see.
So my conclusion is this: All L-funds are a buy, but do not take that literal. Pick one and invest 100% there if you’re going to use the L-funds. The C-fund is still a hold and watch. The S-fund is definitely a buy and hold. The International is still a hold and watch. Bonds is back on the watch list but still not quite ready to buy. If I invest in Bonds, the monthly chart is going to have to make the call. I will not use the daily charts to buy bonds.
My personal TSP account, thanks to the Small Cap and reversal of the International index, hit another all time high value. I’m still down (.02%) for the year, but because of my deposits and matching funds, I have new highs. Earning season is now upon us, so we could have some wild swings in the markets for the next 30 days. Let’s hope all wild to the upside.
Hope all are having a great weekend.
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