Toward the middle of the week, I was beginning to get a bit worried that things might just be slowing down and a turn downward was near. Most indexes appeared to me to be consolidating and or going sideways which is not bad thing, but some of the action during the day was not pretty. Anytime you have a long uptrend there will be pauses to see if buyers are still interested and some profit taking place at the same time. This causes the churn or sideways movement. This sideways movement will flag outward and if it done during a uptrend it is a Bull Flag. Most of the time when price finally breaks in a direction, it breaks up. Bull Flags break up and Bear Flags break down. Not always, but most of the time this happens. Wednesday when I put out that caution flag about all these Bull Flags I just wanted you to be aware of what was happening. Thursday and Friday all of the Bull Flags broke out to the upside and the trend continues. Who would have thunk it?
So what can I add to the indexes at this point that you cannot see with a blind eye? Not much, but do not get caught up in the hype and do not stop watching the charts. Look at the charts and ask yourself, would you invest in it tomorrow or Monday when the market opens? Pretend your just starting out and you have never invested any money in the market to date. My answer to that is this, C,S, and I is the perfect opportunity to jump in Monday since we are breaking out of the Bull Flags on all three. It is one of the best entries when it happens with a stock. I know that the uptrends and the gains to date make it look scary, but charts do not lie. You can see it with no words from talking heads on TV.
The only thing that I really want to add this post is Bonds. You know I have not been a fan for while here because money invested here since September 8th has earned nothing. I’m going to show a special chart here and what I want you to focus on is how tight those blue lines are getting. They are compressed and they are going to turn hard up or down very soon. The other notable problem for bonds is price closed below the Green uptrend line and this is major problem. It doesn’t show well on this chart but price is currently at $110.34 and the 50 day moving average is perched just below at $110.22. The crossover to the downside looks emanate. So I just do not see why I or anyone should invest here. To Risky!!
There is only one thing that I see that saves bonds at this point and that would be the deal falling apart for Greece’s second bailout. If that happens, the stock markets Worldwide will pause or selloff a bit and money will run to bonds. But the way I see it playing out is that bailout will go through and money is going to be leaving bonds in favor of stocks and this is going to push the markets even higher. One more note, the 10 years bonds crossed below the 50 ma today and the 20 year bonds crossed below the 50 day ma three days ago. The 20 year bonds have been in established down trend since Christmas 2011.
TSP Distribution: C-fund 25%, I-fund 25%, S-fund 50%
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