Here’s the money flow for today:
G- 24.55%
F – 9.09%
C – 1.82%
S – 21.36%
I – 43.18%
That’s a 1/3 to 2/3 ratio of capital preservation to stocks.
The big questions are if there is going to be a better buy in point and does it really matter?
It seems the general consensus is that it’s time to buy and hold with some tweeking along the way between domestic and the foreign stocks.
I moved out of the F into the G to collect the penny, I attribute the problems with the F in a large part due to the expected rate hikes but also to folks selling off there bond accounts for more lucrative long investments.
The reason I am sticking in the capital preservation mode is this pennant. Thomas Bulkowski did an extensive study of chart patterns (source: getting started in chart patterns – this was a good eye opener for me – it’s also a relatively easy read) and to summarize, pennants are usually precursors to some action. Bulkowski, recommends selling any pennant that breaks to the downside, because a 5% or more move is likely. Did it break to the downside yesterday? My feeling is not really, and today did not change the situation either.
So, when I start off my process with the two year charts, the bottom of the two year channel is still intact for the large caps, but now it appears to acting as resistance for the small caps. So the large caps are looking good whereas the small caps, not so much. Of course, if the S&P does move up, with the small caps in tow, we could be looking at a nice rally for the small caps. This is about where the good news ends. The evidence for significant gains is really in the long term. However, considering the season, Bernake and the geopolitics - the long term is potentially on the thin ice.
When you look at the channel bottom from a 1 year perspective, you get a shallower growth rate and we have some room between the bottom. To me that begs the question of why haven’t we started to see a rally? again Bernake....etc.
The RSI and the MACD are sitting unusually low, you really have to go back quite a few years to see these indicators at these levels – which screams to the contrarian – buy, but they also have that look of rolling over. Getting to the near term, we have this downward channel and this pennant. In the short term, the picture really ain’t too pretty, in fact were pressed up against the top of this downward channel.
I see us at a breaking point. Of course we all thought the same thing at last Fed, and there were no fireworks. It was a big dud for a couple of days, then it slipped and slipped some more.
Where I now stand is that if a rally is coming, we will see the DWCP break above 565 and the S&P break 1265 quickly and I am all in. However, if the DWCP and S&P slip below 550 and 1240 respectively, then I am going to wait for the retest of 14 JUN.
