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Coolhand's Market Analysis

Sign of Trouble Ahead?

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The fund allocation shifts for both the Top 50 and the Total Tracker this week reveal both groups are moving in opposite directions. Nothing over-the-top yet, but definitely something to keep an eye on.

Roth IRA... a good time?-top-50-fund-allocation-jpg
Roth IRA... a good time?-2012-top-50-trend-jpg

The Top 50 pulled back their collective stock allocations for the second week in a row. Last week it was by 7%. This week they almost matched that by drawing down another 6.88%. They still hold more than a 79% stock allocation, so they're still quite bullish overall.

Roth IRA... a good time?-total-tracker-fund-allocation-jpg
Roth IRA... a good time?-2012-total-tracker-trend-jpg

The herd (Total Tracker) has not had a double digit bullish shift since the week of 17 January (and stocks were higher that week). That week they increased their stock allocation by 11.34%. Since then, they've been quite bearish in spite of the market's advance.

This week, the herd has increased their stock allocation by 16.12%, the largest jump since January of 2011. Total stock allocations are just under 50%, so I don't see this as overly bullish...yet.

But things could get interesting as we get deeper into March. I'm sure the recent pullbacks we've seen has enticed many of us to deploy some capital.

The Seven Sentinels remain in a sell condition, but the stock market has been wavering. We could see another leg higher yet, which may flip the system back to a buy condition should the advance be strong enough. But that's for the market to decide. As I said earlier, sentiment may be shifting to a more bullish posture. Keep in mind that bullish sentiment may need a bit more time to develop in such a strong market before a harder decline might happen.

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Comments

  1. jkenjohnson's Avatar
    I think we're close to the point of exit when everyone starts chasing the rally. Is that what you are thinking?
  2. coolhand's Avatar
    Quote Originally Posted by jkenjohnson
    I think we're close to the point of exit when everyone starts chasing the rally. Is that what you are thinking?
    At the time of this post, I thought we might be getting to that point, but now I don't think so. Not that it's not possible, but sentiment isn't supporting that scenario. And there's a liquidity pump going on to boot. I think there's still too many market positives for the bears to take control.

    But that doesn't mean we can't have any whipsaws, which may have been what happened this week.

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