It has been a struggle, so is the best yet to come?

Even though two of the first three days have been positive, so far the post Christmas week has not lived up to its reputation for seasonal strength.  I have been waiting for that strength for a better timed move to safety.

We know December is the strongest month of the year historically.  We also know that the week after Christmas is the strongest week of December.  Now we are facing a do or die as the final two trading days in December tend to be as good or better than any other day of the month. 

December

Up days:	1, 4, 6, 9, 16, 17, 18, 21, 22, 24, 26, 27, 29, 30, 31
Down days:	8, 11, 14, 15, 20, 23
Most positive:	4, 16, 21, 24, 26, 30, 31
Most negative:	11, 14, 20

Due to the actual day of the holiday fluctuating year to year, and how weekends play into this, dates aren't always as accurate to follow as the trading day itself.  So, the December 30th and 31st strength is likely referring to the final two trading days in December.  This chart verifies that:

                             Chart provided courtesy of www.sentimentrader.com

Note:  Because of the way weekends fell this year, there are only 21 trading days in December, not 22.

Last year was similar to this year and while the market indexes didn't drop the last two days in 2004, they did end the day near the lows of the day after being up higher earlier on.  Sort of like we have been seeing already this week.

Let's move on to January.  Last year I was very concerned about the shape of the market as we entered January.  Rather than stepping aside right away, I decided to play the seasonal strength and wait a few days before getting out.  You can see that strength in the chart below:

January

Up days:	2, 3, 5, 14, 15, 17, 18, 25, 28, 29, 30, 31
Down days:	7, 8, 9, 12, 19, 20, 21, 26
Most positive:	5, 14, 15, 28, 31
Most negative:	7, 8, 20, 26

The problem was that the S&P 500 dropped 2.5% in the first three trading days of 2005.  Once again I was getting signals to get defensive but I didn't want to miss the consistent strength of the first week of January. 

So what you do here will have to be a personal decision.  The signals are out there that we need a pullback but we are still smack in the middle of the strongest few days of the year.  Big risks can lead to big gains... or big losses.

The I fund took off Wednesday without much help from the dollar.  Something tells me the I fund will under perform U.S. stocks today as the 21 cent gain yesterday seemed excessive for what the EAFE and dollar actually did.

Again I will look for strength to take my leave of the stocks funds.  If the indexes are up big Thursday and / or Friday morning, I will likely move some or all of my money in to the F fund.  

Speaking of the F fund, it did see a pullback yesterday after the recent strong rally.  That is a good thing.  The trend is still up for bonds and they needed a day or two to recharge their batteries.  So until I see reason to think otherwise, I like the F fund over the G fund in the short term.

Here's hoping for a couple days of stocks attempting to test those recent new highs.  Of course if they do that it will be tough to push the sell button.  Don't forget that the market is driven by fear and greed.  Trying to catch one more rally before getting out is leaning toward the greedy side.  Buy fear.  Sell greed. 

That's all for today.  Currently 100% S fund.  Thanks for reading.