Early rally turns sour... again.

Yesterday's morning market action played out perfectly - A weak open that came down to, but did not penetrate, the rising trend line.  Then a reversal to the upside attributed to a strong housing report.  It looked as if that bounce I had anticipated had started.  Alas, $67 oil and a letter from the New York Fed regarding "unconfirmed trades" at 1PM ET spooked traders and the selling began.

      

A definite penetration of the 50-day moving average and the trend line was the result.  Again the inability of the market to rally off of the extreme short term oversold and bearish readings does not bode well for the intermediate term. 


                         Chart provided courtesy of www.decisionpoint.com

I still believe we could get a little rally to give a better opportunity to sell if you are in the stock funds, but I hope most of you took my "be defensive" advice, rather than the "or be nimble".  Playing games can cost you as you have witnessed. 

There were very few positives yesterday but I feel as if I dodged a bullet with the S fund being down only .01 yesterday and the I fund down just .02.  The C fund took the brunt of the damage.

I find it ironic that I am now in the exact situation I had warned the bulls about a couple of weeks ago when I was on the sidelines.  From the August 4th Market Comments:

If you time the market you know how it goes when you are fully invested and the market starts to drop.  If we get a couple of down days you say, "I'll wait for the next up day to get out."  Then we may get a flat to down couple of days and you think, "Surely there will be a little rally soon."  Then you start thinking, "Well, I came this far.  I might as well stay invested.  After all, I'm in it for the long haul."

At that point the battle is no longer with the market.  It is with yourself. 

I am eagerly awaiting the new AAII Investor Sentiment Survey results due out this morning.  With 40% polled being bearish last week we could see 50% this week after yesterday's action.  That has only happened once in the past two and a half years.  It led to a two week rally before the market headed south again.

That's all for today.  Currently 25% C, 50% S and 25% I fund.  Thanks for reading.