Is it time to jump back in yet?  Probably not.

That has been the most popular and most obvious question today.  Has this drop set up a buying opportunity?  The only thing I can say is I don't know yet.  Last week I said if the weak support area (trend line #1 below) did not hold, the next level of support would be in the mid 1180's (trend line #2).  That is precisely where the S&P 500 fell to Tuesday.


                   Chart provided courtesy of www.decisionpoint.com

The situation is here again.  If trend line #2 is penetrated, we could test #3, then #4.  On the resistance side, that trend line I marked with a "?" is a major concern.  Did we make a lower high?  If so, the longer term outlook could start to deteriorate.  We'd rather see a move above that line before we see a lower low (a drop below 1163 along the dashed horizontal line). 

The short term overbought/oversold indicators are pretty oversold but since the longer term indicators are still leaning toward overbought, we may see some choppy conditions for a few days.  One more heavy push down would be nice and likely put sentiment numbers into a buy zone.  That may get me to put some money back to work in the stock funds but I think patience may pay off as I don't want to jump the gun trying to catch a falling knife.  It might be better to wait for some sort of confirmation that the pullback is over first.  If this ends up being more than just a little pullback I'll be sitting safely in the G fund.  I'd rather preserve my capital right now than take a chance.

Although last year March got off to a bad start, the first few days of March are typically stronger than average.  When you look at the February seasonality data at the bottom of this page, you'll see the last week of February is not historically the greatest time to be invested.  That big green bar you see at the far right end of that chart might be a mirage as it represents the 20th trading day in February.  Because this is not a leap year there won't be a 20th trading day in February in 2005.  If we can get through February, the first week of March may show some relief.

That's all for today.  Currently 100% G fund.  See you tomorrow.