Buy or wait?

That is of course is the question we all have - particularly when the market pulls back as it has lately.  This pullback has seemed to put a damper on things but when you consider the C, S, and I funds are still up 2.4%, 3.9%, and 1.9% respectively in the first two plus weeks of 2006, this shouldn't yet be considered unhealthy action. 

The very short term indicators were very oversold near the lows of yesterday's drop, but as the market rallied back they moved back to neutral.  The fact that it has twice now moved to neutral rather than toward overbought reading can be concerning.  The intermediate term indicators are still overbought so again I am on the side of being patient for a while longer.

The 21-day moving average of the NYSE McClellan Oscillator has always been a favorite indicator of mine.  The 21-day average is the red line below.  The black line is the daily, shorter term, McClellan Oscillator.  You can see that when the 21-day average moves over the 100 area, the NYSE (in the lower chart) tends to be at, or close to an intermediate term top. 


                                Chart provided courtesy of www.decisionpoint.com

When the 21-day average moves below -100 to -150 area, it tends to be closer to a time to buy.  You can see that this indicator peaked in early December and while the market did start to chop at that time, it is only now starting to pull back.  Whether that indicator will make it all the way down to the buying levels this time around is an unknown.  But that would sure make it easier on us to pick a bottom of any pull back.

The I fund is taking it's lumps but again it is still up almost 2% in a couple of weeks.  After being down about 6% in the past couple of days, the Japanese Nikkei market is up about 2% tonight as I write this Wednesday night.  The interesting part of the I fund weakness is that the dollar is not to blame.  It has been in a tight trading range since the year started, bouncing between 89 and 89.5, or the 200-day moving average and the old support turned resistance line.


                                 Chart provided courtesy of www.decisionpoint.com

Some thing is going to give here and we are bound to see a strong move one way or the other soon which will have a major impact on the I fund.  The fundamental consensus seems to be that the dollar will fall from here, but I don't even want to guess.  I'll wait for the move to occur.

Ebay and Apple Computer came out with earnings after the close Wednesday and while the earnings seemed strong, they sold off in after hours trading on their disappointing guidance for 2006.  Surprisingly the S&P 500 and Nasdaq futures are up comfortably as I write this, in spite of that news.

It would so convenient to see an orderly move down until the indicators become oversold so we can buy back in at lower levels.  But it is rarely that easy and regardless of what ends up happening over the next month or so, the next few days and week could chop around  to keep us guessing.

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