The best may be behind us but I don't
think we're at the top just yet.
The historically weak post Memorial Day Tuesday was just that. Weak. It would have taken a one day move, in my opinion, to take advantage of that be cause we have now seasonally good days ahead. At least for the next week.
We've had a nice rally off the bottom made in mid-April. The S&P 500 has come within about 25 points or about 2% of the March highs. So are we going to head down? I think we will, but not just yet.
Chart provided courtesy of www.decisionpoint.com
Let's take a look at the 1994 chart and see if we're still on track...
Chart provided courtesy of www.decisionpoint.com
I have been saying that the indicators won't get fully overbought until closer to the end of June. I think the 1994 chart tells a similar story. Even though the easy part of the recent rally may be over, just as we can see above in late May of 1994, the S&P 500 still managed to slowly climb higher for a few more weeks. But we have to be careful. You can see that when that leg of the rally ended in 1994, it fell hard and fast in mid to late June. Of course today's action won't follow 1994 exactly, but the economic conditions are similar enough to take note.
The psychology leg of the bull market (the 3 are psychology, monetary conditions and valuation) is getting a bit wobbly again as we started to see in December of 2004. That means "the herd" or the "dumb money" is finally starting to get on board this bull market. Remember they are usually the last ones to the dance. We'd rather be following the "smart money" and going against "the herd". So what is the "smart money" thinking? Here is the result of the recent "smart money" sentiment survey.
Chart provided courtesy of www.decisionpoint.com
This survey is much more volatile and can change drastically from week to week, as opposed to the general public (the herd) survey which changes much more slowly. The smart money turned temporarily bearish last Friday the bulls to bears ratio went to 19% bulls, 48% bears. Last time we saw this (in late February) there was a pause in the one month rally. But just as quickly as they turned bearish, the smart money turned very bullish the following week.
The dollar busted through more resistance. Just when you though the dollar had come too far, too fast, it shot up again to start the week. This continues to put pressure on the I fund.
Chart provided courtesy of www.decisionpoint.com
Bottom line: I think we are heading into the tail end of this leg up. You could lighten up on stocks or wait it out a bit. Remember that my indicators tend to be early. I went to 100% stock funds in early April and the bottom did not come for a couple more weeks. It may be premature to completely get of of stocks here, but it would certainly be the safer move. Remember your investment strategy, goals and risk tolerance, and decide what would be best for you. I may put money into the G fund on rallies. That is inch out on the way up, if you will.
That's all for today. Currently 65% C, 35% S fund. Until next time...
The historically weak post Memorial Day Tuesday was just that. Weak. It would have taken a one day move, in my opinion, to take advantage of that be cause we have now seasonally good days ahead. At least for the next week.
We've had a nice rally off the bottom made in mid-April. The S&P 500 has come within about 25 points or about 2% of the March highs. So are we going to head down? I think we will, but not just yet.
Chart provided courtesy of www.decisionpoint.com
Let's take a look at the 1994 chart and see if we're still on track...
Chart provided courtesy of www.decisionpoint.com
I have been saying that the indicators won't get fully overbought until closer to the end of June. I think the 1994 chart tells a similar story. Even though the easy part of the recent rally may be over, just as we can see above in late May of 1994, the S&P 500 still managed to slowly climb higher for a few more weeks. But we have to be careful. You can see that when that leg of the rally ended in 1994, it fell hard and fast in mid to late June. Of course today's action won't follow 1994 exactly, but the economic conditions are similar enough to take note.
The psychology leg of the bull market (the 3 are psychology, monetary conditions and valuation) is getting a bit wobbly again as we started to see in December of 2004. That means "the herd" or the "dumb money" is finally starting to get on board this bull market. Remember they are usually the last ones to the dance. We'd rather be following the "smart money" and going against "the herd". So what is the "smart money" thinking? Here is the result of the recent "smart money" sentiment survey.
Chart provided courtesy of www.decisionpoint.com
This survey is much more volatile and can change drastically from week to week, as opposed to the general public (the herd) survey which changes much more slowly. The smart money turned temporarily bearish last Friday the bulls to bears ratio went to 19% bulls, 48% bears. Last time we saw this (in late February) there was a pause in the one month rally. But just as quickly as they turned bearish, the smart money turned very bullish the following week.
The dollar busted through more resistance. Just when you though the dollar had come too far, too fast, it shot up again to start the week. This continues to put pressure on the I fund.
Chart provided courtesy of www.decisionpoint.com
Bottom line: I think we are heading into the tail end of this leg up. You could lighten up on stocks or wait it out a bit. Remember that my indicators tend to be early. I went to 100% stock funds in early April and the bottom did not come for a couple more weeks. It may be premature to completely get of of stocks here, but it would certainly be the safer move. Remember your investment strategy, goals and risk tolerance, and decide what would be best for you. I may put money into the G fund on rallies. That is inch out on the way up, if you will.
That's all for today. Currently 65% C, 35% S fund. Until next time...
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