January turned out to be a major down month, specially when you compare it to last year when we had are largest one month returns of 2013. January of 2013 we averaged about a 5% return and this year about 3% down. Goes to show you you cannot bet on the past but must use what you can see today. Looking at my spreadsheet to the left you can see that February 2013 was not that great either.
We are definitely at a cross road with the S&P 500 and the Small Cap. The International has already fired the sell and we have Bonds telling us to invest safely there. So many cross current signals that are trying to confuse me. Stay invested in the aggressive funds or run to safer funds? The things I must ponder.
The S&P 500 above is building a solid battle line that buyers and sellers are defending. It appears that after last weeks ups and downs that $1770 is line in the sand. It held up back in December of 2013 and it has so far held up in 2014. This is new information to me that just started to show up by Wednesday. Things are starting to compress here and if $1770 doesn’t hold, the sell or bailout line that keeps moving up while prices go sideway, is going to be so tight that the slightest downward movement is going to fire a sell. I also feel like we are currently oversold which could mean that we could snap back up soon. Either way, I think next week is going to be critical in that if prices do not reverse back and continue the uptrend, we could be in trouble. ‘
We have a few other things that concern me here and the first is that price is trading under the 50 day moving average and the 50 is falling. We also still have two warnings in effect. So I will stay invested but I’m very guarded and concerned.
The Small cap is in a little better shape than the S&P 500 but not by much. We do have support line that did develop this week but it is different in that in December it was resistance, not support. Here that same price level is acting as support and that level is $970. I think it is going to be important for that level to hold. The current price on the Small Cap is above the 50 day moving average here but only by pennies. We also only have one warning in effect here, unlike the two that the S&P 500 has. Things are better but we are not out of the woods and more work this week needs to be done to the upside. I will stay invested here, but I’m also very concerned.
I bailed on the International Index last Monday because price broke down through my last warning level. Since that time price has continued lower and is now going to make a lower pivot low soon. This is the first sign of a trend reversal which means lower prices. Monthly it is still showing safe, but here on the daily, not so much. It is possible that next week we could get a reversal but it is going to have to strong and it’s going to have to run a long time to fix the current condition. I have lost faith in the International Index and will just stay invested in the C and S funds if I want risk.
What bothers me here with Bonds firing a buy signal 2 weeks ago on the daily chart and also firing a monthly buy signal yesterday, is this, what does it mean? Does this mean that the big traders are running to safety? Does it mean we are about to see a major pullback in stocks? It does make me ponder. But what I will be forced to do Monday as long as bonds are holding above $108 is to make a move into them. I will roll 10% of my funds into Bonds Monday if they hold at or above $108 by 11:30am
Conclusion: We are at a cross road next week and I believe it is going to break in one direction or the other hard when it does. It’s anyone’s guess to which, so I will just sit back and watch and make my moves based on price.
Have a great Super Bowl Weekend.
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