A little short term risk in the stock funds

After everything I wrote about yesterday (see bottom half of this page) regarding pessimism now being at short term extreme levels, and the S&P bouncing off intermediate term support levels, I decided to take a shot at a potential rally. 

For trading purposes I would define the short term as from 1 to 3 months, the intermediate term would be 3 to 6 months, and the long term being over 6 months.
The very short term would be days to one month.

I had mentioned on the message board the other day that I saw 1226 to 1227 as the next resistance level (very short term) for the S&P 500.  When I was getting ready for work yesterday the S&P had already moved over 1228.  I had to decide if this little breakout was going to lead to a small rally.  Based on those short term indicators I decided to give it a shot.


                         Chart provided courtesy of www.decisionpoint.com

I am thinking it will be no more than an oversold rally that will only last a week or so, similar to the ones above marked with an 'X'.  I also marked where I believe the next resistance might be, which would be the 1235 to 1240 area.  The down trending overbought/oversold indicator below may move up toward 250 in an attempt to correct itself, before heading back down.


                         Chart provided courtesy of www.decisionpoint.com

The short term McClellan Oscillator indicator has also put in another bottom and is heading up.  Resistance would be near 0. 


                         Chart provided courtesy of www.decisionpoint.com

So things are showing a good possibility for a rally BUT the big problem comes if we don't get a rally.  When the market can not rally off of extreme readings as we are seeing now, it is a sign that things are turning for the worse and we may be putting in a longer term top.  This is why I say to those who are trying to time the market rather than just buying and holding to be nimble, or be defensive.  The very short term favors a rally, the short term is neutral and the intermediate term looks "toppy." 

I am not giving advice here.  I'm just telling you how I am going to play it.  I get a few "What the heck are you doing?" emails every time I make a transfer.  The question you need to ask yourself is, what are you doing?  I give my opinion based on what I see happening and you can take it for what it is.  Then you have to make your decision.  I will not always be right.  You will not always be right.  Noone, anywhere will always be right.  Make the best of the information you have. 

That's all for today.  Currently 25% C, 50% S and 25% I fund.  My finger is close to the eject button to get me back on the sidelines at any sign of trouble, or to take a quick profit if we go up.  Thanks for reading.