Back on the sideline... mostly.

I was looking for some sort of rally to get out of the market again and yesterday gave me a little opportunity.  After the S&P 500 fell through support Wednesday, even at a time when the short term indicators suggested we should see a bounce, it told me we could facing a tough period for stocks. 

The small rally yesterday was nothing to write home about but it did enable me to get out of my mistake with less than a 1/2 % loss.  As I reiterated in yesterday's market comments, sometimes you can sit there like a deer in the headlines when the market moves down on you. 

The new AAII Investor Sentiment Survey actually saw the bullish percentage go from 29% last week to 36% this week, and the bearish percentage dropped from 40% to 31%.  Strange reaction considering the recent market action.  Perhaps we are seeing too much complacency and the herd is expecting a bounce.  You know what happens when you expect a bounce?  It usually doesn't show up.  This helped me make the decision to jump back out of stocks as I had anticipated a bearish percentage closer to 50%.

My new allocation of 75% F fund and 25% I fund leaves me with some exposure to stocks just in case.  The reason for using the volatile I fund at this time is because the dollar seems to be rolling over again having failed to rally back to its recent high.  My guess (you know what that is worth) is it has a good chance to pull back to the 85 area.  That will help out the I fund by either cushioning a drop, or accelerating a gain.


                         Chart provided courtesy of www.decisionpoint.com

Did anybody notice the excessively poor performance of the I fund Thursday?  With the EAFE up nearly a half percent and the dollar down .20%, we should have seen a decent gain in the fund.  Instead it lost .06.  The reason we see anomalies like this is because the international markets are open day and night and sometimes adjustments have to be made before the managers of the EAFE funds have to report a share price.  It was either an adjustment to the prior day or we will see it corrected in tomorrow's closing share price.  My guess is it was the former as the I fund lost only .02 Wednesday when the EAFE was down more significantly.

We have a strong seasonality period coming up next week.  While September as a whole is awful historically, worst month of the year by far, the last trading day in August and the first few days in September tend to be stronger than normal days.  That of course would mean the last three days leading up to Labor Day weekend.  After Labor Day is another story...


                             Chart provided courtesy of www.sentimentrader.com

August's chart is at the bottom of the page.  Seasonality should never be used as a primary indicator but it should be considered and help make tough calls.

That's all for today.  Currently 75% F and 25% I fund.  Thanks for reading.  Have a great weekend.