Last Friday the market tanked and I stepped aside.  Then we get two strong days in a row. Not wanting to fight it, I jumped back in.  As you may have read in an email alert or on the message board, I moved to 40% C, 30% S and 30% I effective Today (Wednesday).  This is the tough part of trading and not my strong suit.  When my indicators tell me we are bottoming, stocks are cheap and sentiment is bearish, we tend to get a rally... eventually.  When the indicators are overbought, sentiment is too bullish and stocks are priced high, I can get out with confidence.  Right now the indicators are mixed and I'm chasing.  I'm letting the market guide me.  Not fun.

Will this rally continue?  I really don't believe this will be a long lasting rally but momentum is back on the bulls side and I don't want to be watching from the sidelines.  But don't be surprised if this all changes in a few days.  I don't have a warm fuzzy about things now but from a technical standpoint things look... OK.  The S&P 500 had the breakout to the upside from the recent short term drop.  Also the support at 1163 has held...


                                 Chart provided courtesy of www.decisionpoint.com

Even a longer term chart shows a cup & handle formation with a breakout and pullback to the breakout area.  All very positive. 


                            Chart provided courtesy of www.decisionpoint.com

Another positive is the price of oil.  I mentioned the head & shoulders pattern it was forming a couple of weeks ago.  It is still intact and may be on the way to testing the neckline somewhere near 41.  As the situation in Iraq improves, the price of oil should also improve.


                                Chart provided courtesy of www.decisionpoint.com

All that said you would think the market would have no problem moving up.  But I'm still nervous but as I keep saying, when I'm nervous, good things seem to happen to the market.  I just wish the options traders, odd lot traders and the investor surveys would have shown a little more fear.  Could the indices give us one more scare?  Definitely.  So let's be careful.  As I said I'm letting the market make my allocation changes.  The indicators are mixed and I'll just go with the flow until the picture is more clear.  Maybe the Fed will have something to say today that will set the tone.  What do you think?  Will interest rates be raised again?

That's all for today.  Currently 40% C, 30% S and 30% I fund.  See you tomorrow.