I have been likening the market action so far this year to that of early last year. Last year buying oversold conditions and selling overbought conditions would have worked well. That sounds easy but as many of you are finding out, it is tough. When the market is falling you are tempted to get very bearish and think the worst is always yet to come. Likewise, when the market is rallying strongly and overbought, the last thing you want to do is bail and possibly miss the boat. That happened to me in July. Ouch!
Let's take a look at early 2004 and the current market. I won't give you too much commentary here. You can just take a look at the various points of comparison I've marked on the charts. I'm hoping we are at the end of #2.
Chart provided courtesy of www.decisionpoint.com
Chart provided courtesy of www.decisionpoint.com
Speaking of overbought and oversold conditions (in very basic terms, overbought means the market is due for a rest and oversold means it may be ready to turn up); The current short term indicator is actually back to neutral after being deeply oversold. The problem is we haven't rallied very much yet and we could become overbought without any significant gains and unfortunately we'd have to consider getting out of stocks again. Sort of a premature evacuation.... Sorry about that.
Chart provided courtesy of www.decisionpoint.com
Oil dropped nearly a dollar yesterday which helped the market hold its modest rally. It continues to be oil up, market down. Oil down, market up.
The I fund mocked me by having a strong day the day I get out. It was probably due and the dollar cooperated by not going up yesterday. Looking forward I still believe the dollar is trying to form a big old bottom and that makes the C and S funds more attractive to me right now. Of course on a day to day basis anything can happen.
That's all for today. Currently 60% C, 40% S fund. See you tomorrow.
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