Obviously there are a few things that can happen from here. We could rally, fall further, move sideways or chop around. The very short term indicators are oversold and we could see a little bounce today but this is one of those indicators that could be very temporary and not worth a play. The longer term overbought/oversold indicator is still leaning toward overbought but coming down to neutral. I am waiting on the new sentiment numbers. I would think after Tuesday and Wednesday's action the herd is getting more bearish. The question is, how bearish? Enough to flash a buy signal?
The danger of getting in early is that some sell offs can be quite brutal. The danger of being late is you can miss a bounce back. The S&P 500 breakout has just failed so I am in no rush to get bullish. Again when it comes to account management, I have to look at the three legs of the bull market I follow. If they were all solidly in the bullish camp I would have no problem jumping back into the market. When they are mixed as we are seeing now you have to worry more about preserving capital. I'll save getting aggressive for a more clearer sign. I will stay on the sidelines in the G fund.
Chart provided courtesy of www.decisionpoint.com
With the jobs report out of the way, oil seems to be the current focus and culprit for the decline as the indices seem to be moving inversely to oil's movement during the day. Oil goes down, stocks move up. Oil goes up, stocks move down. Sort of like the dollar and the I fund. Oil just made a four month high.
As I said, we could see a small bounce here but I expect this correction, pullback or consolidation, whatever we want to call it, is not going to go away after a couple of down days. If you are quick and want to move in and out and try to catch every turn, be my guest. I haven't had a lot of success doing that myself. I am going to wait for the longer term indicators such as the 21-day moving average of the McClellan Oscillator and the 10-day moving average of the ARMS index, to tell me to get bullish. Of course sentiment is still a major factor and I will keep a close on eye on it.
That's all for today. Currently 100% G fund. See you tomorrow.
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