Not pretty, but still OK.

I go away for a few days and this is what you do to the market?    The bad news is the market is dropping again, the good news (in my opinion) is that I still believe the low is in. 

On Wednesday we had a bit of a terrorist scare with the small plane in D.C.  and earlier in the week some talk of some hedge funds that were in trouble.  I'm not sure exactly what spooked the market yesterday but the low was equal to that of the prior day's, about 1157.75.  Oil fell dramatically again but obviously that didn't help things too much.  If you look at the S&P 500 chart near the bottom of this page, you see that the first support line held up for one day, the second support line one more day, and now the third for two days.  Is this breakdown a bad thing?  Well, for our accounts right now it is, but I don't see going too much further down.

I will again compare this market with that of 1994.  If that comparison is to continue we will bob and weave for some time.  You can choose to try to play the short term swings and possibly increase your return if you are accurate in your predictions but it always looks easier when you look back rather than ahead.  I will attempt it here and there using my overbought/oversold indicators. 

1994...


                         Chart provided courtesy of www.decisionpoint.com

2005 ...

  
                        Chart provided courtesy of www.decisionpoint.com

Then what happened? 1994 and 1995....

                        Chart provided courtesy of www.decisionpoint.com

The choppy market continued throughout 1994 with peaks coming in February and late August, with several low points, but the actual low put in early on in the year, held.  The S&P 500 ended that year slightly to the downside but that year long consolidation preceded an enormous rally in 1995.  Are we repeating this type of market behavior?  So far, but I doubt it will be easy to base trades now on this information.  It would be nice, but nothing is ever that easy with the market.

So you can either be patient and stay in the stock funds and enjoy the ride, you can stay out of the market if you feel more comfortable that way, or you can play the chop as I mentioned.  I think I will likely make some moves but there may be only a handful of meaningful tops and bottoms in this consolidation as we see in the 1994 chart.  We are closer to the bottom now so I will remain in stocks for now.

That's all for today.  Currently 65% C, 20% S, 15% I fund.  Until next time...