SUGGESTION FOR 401-K. Same comments as last week. If you've had all of your money out of the market, now is not the time to jumping in 100%. We are at a critical level right now where we need to watch what the market and let it tell us what it wants to do next. Either we'll see a continuation of the existing long term up trend or if the market moves in the opposite direction there is a high probability of the long term trend shifting down based on the metrics I follow.
LONG TERM MODEL: This week I'm going to share with you a chart of the historical signals on the monthly SPY chart. As you can see there have been two buy signals and two sell signals since November of 2001. We have currently been in a buy signal since March, 2009. From this point forward each time a major buy or sell signal is given I will update this on the chart.
You may be wondering what the green circles are. Whenever you see a green circle below the red line after a sell signal, this represents an area where the market rallied at least 10% before the down trend resumed again. Whenever you see a green circle above the green line after a buy signal, this represents an area where the market declined at least 10% before the up trend resumed again. How beneficial would it be to know that there is a high probability the market will rally at least 10% in a down trend? How beneficial would it be in an up trend to know there is a high probability of a 10% decline? This is what the intermediate term model that I'll be unveiling next week is designed to accomplish. If you have any questions, please don't hesitate to call or email. Have a great week.
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