Update 12/24/07

Last week ended with a bang and it left me standing on the sidelines.  Ultimately, very little was gained from the move into the F-fund.  I’ll chalk the last couple of weeks off to risk management, after all, it could have been worse.  While I am disappointed that I did not catch Friday’s rally, I did move into the S-fund Friday and am now poised to catch what is left of this rally.  This move deviated from the decision tree in two ways.  First, the SPX never made it to the bottom of the five year channel, triggering the support move there.  Second, I moved into the S-fund instead of the C-fund.  Both of these deviations occurred because of the same reason.  Several major indexes moved to the bottom of their multi year channels igniting an oversold rally.  This includes the DWCP (Wilshire 4500). 

Since we are now into the light volume holidays anything can happen and it can happen quickly.  The indicators had been flattening for a couple of days prior to Friday, but now they have turned firmly bullish.  Last week I mentioned the head shoulder’s patterns that formed in 1999.    Similarly, we broke out of the head and shoulder’s pattern this time and we now appear to have a pennant forming.  This pennant pattern typically moves to the point and can break either way.  At this stage of the game, I believe the only smart thing is to ride the indicators.  Therefore, I’m skipping a decision tree, because I only see one move – ride this rally until a top forms.

Griffin