Currrently, I am 100% in the F-fund and have reaped some decent gains. The Ten year note (TNX) move inversely to the F-fund (ticker AGG) and has plenty of room to the downside before hitting any real resistance, conversly the AGG has plenty of room on the upside before meeting any real signficant resistance. Therefore, I am very comfortable where I am given that the ity bitty moves in the stock market are not leaving me behind.
Speaking of the stock market - let's take a look at what's been going on intraday. Let me caveat what I am about to say - I think it is very unlikley that we will see a significant move up from this point, so if that turns about to be wrong, then you may want to tuck it away for later.
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While the trend is clearly down, we have seen these moves step down in big one day moves followed by mini-relief rallies that have actually been slightly green.
It's almost enough to inspire one to jump in (imagine in my best Billy Hayes voice) "But Wait....There's More....will double your order"
Today the S&P popped up to the bottom of the gap that was created on the 17th of December and then slipped down to 1445 - ten points above the gap that was created on the 28th of November.
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Gaps - come in different flavors but they all basically have one component - a large number of people simultaneously decided that they were leaning in the wrong direction and moved their positions. Gaps represent signficant attitude shifts. The interesting thing about Gaps, is they tend to result in an overload in the other direction and therefore reverse themselves shortly afterwards. Gaps are all about reversals. Some gaps are meaningless, but both of these gaps appear to have substance and here my thoughts on this.
The upper gap - 1465-1468 occurred when the market realized that the FOMC policy sell-off was not going to rally and it is reasonable to argue that the breaking of the 1470 support level was a significant factor in that consensus. As Tom predicted, this gap has turned into resistance. This suggests the market really needs something meaty to sink it's teeth into, in order to undo the damage by the FOMC committee. Unfortunately - there's is nothing coming down the road to really hang that hat on.
The downside gap is the signficantly more important one. Just as breaking the upside gap would suggest the trend is shifting back into the bulls court, the filling of the downside gap suggests that the trend started by that gap is now reversing. The 1435 gap occurred because the five year channel did not fail, which triggered a mighty rally, a reversal would trigger a sell-off. Coincidentally, if tomorrow stays in the intraday channel and now moves down, the S&P is going to fill this gap and smack head on into the support of the five year channel.
At this stage of the game, the only reason to believe that this support level will hold, is because of the Santa Clause rally. This door has been knocked on twice in the last few months and three times can often be the charm.
If you recall what I wrote in this weeks brief about the 1999 top - two consecutive head and shoulder patterns followed by a double top - it's possible we could see a rally from here - anything is possible, but if your like me and your sitting in the F-fund - the grass IS NOT GREENER - in fact it's a bit Grinchy puke green right now. I really would need a darn good reason to abandon my position in bonds. Santa is powerful - but not almighty - we've been spanked this time of year before - in fact I think you only have to go to 2005 to find proof.
and you are very cool. I'd rather go with you!!!
this should be a precursor. We may get freebie on what's to come in the S fund.
I at least like your posts alot. Wish I could see a chart though, maybe post a link or something so we can see more what you mean. I use Sharpcharts. The S is $EMW there - here's a link: 
, I am finally getting some guideance, again to help me make the right choices. Thank you for your willingness to share without the almighty $$$ getting in the way.
