Something to Consider

We still have a buy signal in place from the Seven Sentinels, and I plan to hold my 100% stock position as long as that signal stays on a buy.

I mentioned a possible scenario in my thread a couple days ago about the market forming a top that could take a little time to play out.

We've seen how relentless market direction has been on both the downside and the upside since last October. Parabolic moves would seem to be perfectly normal given the extreme nature of the underlying fundamentals for the global economy. With so many traders/investors sidelined for much, if not all of the recent move higher, buying weakness is becoming more attractive as risk to upside is now perceived to be about equal to downside risk. I say it is about equal in spite of the fact that we are overbought and sentiment is relatively neutral. Parabolic moves are like that. Even with a correction right now, I doubt a lot of damage would be done and we could easily move back up again.

But this is speculation. I still have to give overwhelming credence to a sell signal from the SS.

So let's assume we continue higher. What is going on in the market right now that we should be aware of. I have three indicators telling me to overweight the I fund (which I currently hold a 50% allocation).

First, take a look at the dollar, which just fell below the 200dma:

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=34570884

It appears to be breaking to the downside, and given the extreme liquidity being pumped into the markets, this is exactly what I would expect.

Second, the British Pound also appears to be making a move:

http://broadcast.ino.com/education/british_pound_on_the_move/?campaignid=3

Be aware, if you are not already, that our I fund is influenced to a great degree on currency valuations, especially between the British Pound, Japanese Yen, and the Euro. If the British Pound moves higher as projected in the previous video, and the dollar continues lower as expected, the I fund could see significant gains above those made in either the S or C funds.

The crude market, and specifically United States Oil (USO), also appears to be poised for a move higher. Generally speaking, when the dollar weakens, oil tends to move in the opposite direction; in this case up, given a weakening dollar. Here is another video with some good TA on USO:

http://broadcast.ino.com/education/uso_and_crude_oil/?campaignid=3

So since I have a buy signal from the SS, I have to continue my exposure to equities. But the I fund looks to be breaking out, so it makes sense to overweight that position.

That's my opinion based on three indicators. It will take time to play out yet, but I'm looking to maximize my gains given this analysis.

One might wonder if a 100% I fund position might be the best allocation given this information. I don't think it would be a bad play, but if you like to have a little diversification to even the risk you might consider spreading out your allocation. Mine is currently 25/25/50 CSI. If the I fund outperforms in a continuation move higher, I will add to my overall gains, but if the market decides to move lower, I might mitigate losses if the dollar continues to drop too.

Just something to consider.

 

[XL-entLady]

Excellent comments as always, my friend! I also agree with you that the $USD may be the key to the markets for the next while. Just posted something to that effect in the P&F chart thread. I hadn't thought about watching the interaction between the dollar and the euro/pound/yen, etc. Thanks for the tip!

Noticed that your SS signals moved back to about 4/3 yesterday. Backing further away from that sell signal. I'll keep watching it with my finger on the big red button.

Good job!
Lady

 

[CrabClaw]

Thanks as always CH. I have been on the sidelines since about 1/2 way through the rally but I was in on the way down in late feb also so I basically came out even on the deal. I am going to give the SS a shot, It looks to be a solid system. I have been pondering this weekend if I should jump in until they give a sell and then start to play the SS signals from there. Maybe Monday will be flat or a bit down for a probable short term play.

 

[coolhand]

I have been pondering this weekend if I should jump in until they give a sell and then start to play the SS signals from there. Maybe Monday will be flat or a bit down for a probable short term play.

That's the problem I had back in late March. Back then a pullback looked certain too, but it was tough to find one, and when we did get one, it reversed quickly. It's not an easy decision, but I still do not think we will see too much selling pressure aside from a possible correction. When that happens is impossible to know.

Every time it looks like a sell-off is imminent, the shorting starts and an opportunity to push higher on short covering presents itself. The bears made a lot of money the past few months, so there's definitely some fuel there.

Let's see what the market decides to do tomorrow.

 

[Boghie]

Coolhand,

I really don't know how to read the charts - but I will try.

Regardless, this equities boom may just dump us into the region that a standard market correction would have left us. A 30% correction in the S&P would dump us 1050, 20% at 1200, 40% at 900. A 30% market correction was probably proper. The insane panic clipped the market almost 60%. So, my guess is we are normalizing. I do think the charts are showing that pattern.

Anyway, if the S&P rises above 950/1000 than that is probably a sign of a new bull - or, at least, a return to normal 8% – 10% equity returns. If that happens I’m reallocating more into C/S/I – back to a 70% - 80% holding in equities. I will still be able to bail out to G in stages. That would give me a 7/8% gain.

My biggest concern is California. The citizens of my fair state are being asked to vote for a huge tax increase. There is absolutely NO confidence in this state that those taxes will do anything to resolve our huge debt. There is absolutely NO confidence in any element of the political leadership of this state. I think California may soon default on its bond debt. So, I’m hoping for a level market till the issue in California is decided around May 19th. I can’t square a huge market up move with a looming collapse of the world’s seventh largest economy. Don’t know what to do.

 

[Zipper]

I believe jobs are on the decline and spending is on the decline and saving is on the decline. I'm getting the feeling like G fund is the way to go for now. Maybe a rally late in the summer or fall.

 

[coolhand]

My biggest concern is California. The citizens of my fair state are being asked to vote for a huge tax increase. There is absolutely NO confidence in this state that those taxes will do anything to resolve our huge debt. There is absolutely NO confidence in any element of the political leadership of this state. I think California may soon default on its bond debt. So, I’m hoping for a level market till the issue in California is decided around May 19th. I can’t square a huge market up move with a looming collapse of the world’s seventh largest economy. Don’t know what to do.

I lived in San Diego for 20 years. My oldest two daughters still live there, but I left anyway after I retired from the Navy. I know all about the great state of Kahlafonia. :cheesy:

I guess now that the SS has given a sell signal, you know what to do.

 

[coolhand]

I believe jobs are on the decline and spending is on the decline and saving is on the decline. I'm getting the feeling like G fund is the way to go for now. Maybe a rally late in the summer or fall.

I got out yesterday on a sell signal from the Seven Sentinels. I'll be hiding in G until the next buy signal is triggered. Typically, it takes at least two months, but this market has not been typical. Last year the system went as long as about 7 months without a buy signal; boy the carnage it missed.

 

[Boghie]

Coolhand,

I live in 'Our Nations Finest City' - at least in the early eighties... Still a very nice place, but there are so many nice places in our country. Never been to your part of town, but I hear many good things about it - and you don't live in any part of Kahlafornia. We is going broke. Actually, we is broke...

Anyway, I did bail out on the 5th (COB). Not completely out, I'm not good enough to do that. Still, I'll ride my 35% stock holdings down for a bit because I do think this market will turn back. Can't waste my final positive IFT on a backwards trade if I can help it...

From the IFT reallocation records it looks as if the folks are hedging...