We finished August with a nice little rally with all of the stock funds picking up over 1% on the day.  Now we head into September - the worst month historically for stocks, but it is not a dull month at all.

Friday's gains solidified a 1.5% gain for the C-fund in August while the S-fund ended exactly flat, and the I-fund lost about 3/4 of a percent.  An interesting mix.  September is historically mixed as well.  Since 2000 we've had some big gains and some very big losses in September.  In 2001 the S-fund lost 12.5% in September.  In 2002 both the C and I-funds lost over 10%.  Since then we've seen more moderate 1% to 4% gains and losses but there were some pretty big differences between the funds.

The S&P 500 moved above the 50-day moving average briefly on Friday and the lighter volume last week made it particularly volatile.  The fact that it closed below the 50-day moving average makes you wonder if there are sellers above it.


                                   Charts provided courtesy of www.decisionpoint.com

Let's take a look at the 1998 chart of the S&P 500.  We've talked before about the similarity in the chart compared to this year's chart.  It's worth noting that the S&P corrected, rallied back to the 50-day moving average, then moved down to test the prior lows.  So it is important for the bulls to see the S&P move back above the 50-day moving average and hold for a couple of days.  Otherwise that is another very good technical reason to sell here.


                                  Charts provided courtesy of www.decisionpoint.com

On Friday I was in the I-fund for a one day system and seasonality induced day trade.  It paid off but I immediately moved back to the sidelines for today.  I chose the G-fund as it is due to pay its penny gain today while the F-fund is still looking good, but getting extended. 

This chart of the AGG shows us that bonds are trading at the upper end of its recent trading channel and could take a little breather.


                                   Charts provided courtesy of www.decisionpoint.com

The AGG has been moving higher for three months now, mainly in anticipation that interest rates are going to be moving lower.  If bonds sell off at any time this week, I won't be shy about jumping back in, that is if stocks don't give us a reason to get invested. 

We have a mixed bag of signals from our trading systems today.  Trader Fred's TSP Trader System remains in the F-fund, The Sentiment Survey System will be in the G-fund this week, and today the EbbChart System will be in the I-fund with a contrarian buy signal (with 2 stop signs).  Tomorrow, however, all three systems will be on the sideline (either F of G-fund).  In the recent past this agreement in the systems has been a good day to be out of the market.

I expect the volatility to continue for several more weeks and that could mean some active trading.  I am currently 100% G- fund but I don't know for how long.  The F-fund will look good on a pullback, and stocks could go either way.  It has been beneficial recently to buy weak days and sell strong days.  That may continue to be the case for a little while longer.  It's September so expect it to be anything but dull.

That's all for today.  See you back here tomorrow.

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