Solid

The market was a bit choppy Thursday but buyers stepped up big time late.  That's always a positive sign for the market.  With an hour and a half to go, the Dow had lost all of its early gains but then took off impressively into the close.

       

The recent strength has the S&P 500 above the recent short term downtrend and the only thing left in its way resistance-wise, is the early January high.


                              Chart provided courtesy of www.decisionpoint.com

Again I am faced with a dilemma.  To play a short term rally, if that is what this is, is tricky for TSP participants.  We could get a few more higher days but as we saw a couple of times this year, the market can give back those gains rather quickly.  Too quickly for us to react.  The last thing I want to do at this point is give back gains that I did not make.

I hate to continue to hide but I would really prefer to be a buyer of oversold conditions rather than jump on a rally.  We just haven't had any real oversold conditions since last October.  We are on the overbought side right now but that doesn't necessarily mean the market can't go higher.  As a matter of fact, a market that continues higher when the short term indicators are overbought is a sign of a strength. 


                              Chart provided courtesy of www.decisionpoint.com

The question is, can the market continue higher from this overbought level or will it give way as it did from this level in late January? 

Good traders can make decent money in these short term oscillating markets.  But traders, know thyself.  I don't consider myself a good short term trader.  See RevShark for that.  I like to buy solid oversold conditions and sell the overbought conditions.  I have been waiting for this market to get oversold for a long time and it has been a painful wait. 

I frequently talk about about the three legs of the market that I follow.  When two or three of those legs are in positive territory I have a little discipline that I follow that doesn't allow me to get less than 50% invested in the stock funds.  For the last several months the psychology leg and the monetary conditions leg have both been in the negative zone.  That is what is keeping me on the sidelines.  It doesn't mean I can't be in stocks but it does mean I have to be more patient and err on the side of being too cautious rather than overly aggressive.  If one of those two negative legs move into positive territory, my discipline says I must get invested.

Until then I will only jump into stocks if I believe a move higher is going to last more than a few days.  Right now I can't be sure. 

That’s all for today.  Currently 100% G fund.  Thanks for reading.  Have a great weekend.
 

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