Good Evening,
Today was a day when nothing worked. Stocks were down, corporate bonds were down, treasuries were down, gold got chewed up and silver was a disaster. The only things that didn’t go down (only because they can’t) were the G-Fund and cash. We are definitely in a down trend. We may get a little reprieve, but we will probably head down for a real correction of 10% or more after that. We’ll talk about that with some charts a little later…
Stocks tumble as global jitters persist
The day’s selling left us with the following signals: C-Sell, S-Sell, I-Sell, and F-Buy. Our new allocation is 10/G, 90/F. It is off -2.30% after the recent selling.
| 01/24/14 | Prior Prices | ||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 14.3104 | 15.9425 | 23.1457 | 33.1269 | 24.8666 |
| $ Change | 0.0010 | 0.0178 | -0.4938 | -0.8486 | -0.7109 |
| % Change day | +0.01% | +0.11% | -2.09% | -2.50% | -2.78% |
| % Change week | +0.05% | +0.33% | -2.62% | -2.29% | -2.93% |
| % Change month | +0.16% | +1.28% | -3.06% | -1.61% | -2.73% |
| % Change year | +0.16% | +1.28% | -3.06% | -1.61% | -2.73% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 16.7572 | 21.5197 | 23.0735 | 24.3637 | 13.7573 |
| $ Change | -0.0758 | -0.2656 | -0.3654 | -0.4464 | -0.2873 |
| % Change day | -0.45% | -1.22% | -1.56% | -1.80% | -2.05% |
| % Change week | -0.47% | -1.34% | -1.72% | -1.98% | -2.25% |
| % Change month | -0.35% | -1.27% | -1.64% | -1.89% | -2.18% |
| % Change year | -0.35% | -1.27% | -1.64% | -1.89% | -2.18% |
So what’s really going on? This is from Decision Point.com which is totally accurate and agrees 100% with my analysis.
The head and shoulders pattern is frequently how a price index puts in a top, and, while it may be a bit early to start talking about it, it is one possible scenario that we can anticipate. A few weeks ago we identified a rising wedge pattern, which believed would resolve downward because that is what that pattern usually does. The expected breakdown happened today, and now we look for signs of what may happen next.There is a line of support drawn from the May 2013 top that has a lot of credibility because it engages three tops and two bottoms. That line is the most obvious place for prices to find at least temporary support, even if prices are destined to move lower. We can see that a left shoulder and head have already been formed, and if prices bounce off that support line (which is also the neckline), there is a good chance that a right shoulder will be formed.For the formation to be somewhat symmetrical the bounce would have to be fairly shallow and with a duration of several weeks. If the head and shoulders breaks down after the right shoulder has formed, the minimum downside target would be about 1700. As I said, this is only one possible scenario, but things are pretty well aligned for that outcome. But first things first. Let’s see if there is a bounce next week.
That was posted Friday night. Of course, as we all know now, there was no bounce today. I do expect that there will be a small surge to complete the right shoulder so we will be careful not to get trapped. Either way I think we are correcting and I will not go back into equities until I have solid buy signals and room to run. Capital preservation is our number one concern at this time. We made some money during the past 12 months and we must not lose it. Don’t forget to pray for our group! May God continue to bless your trades.
See you tomorrow.
Scott
