Market Conditions Tonight

Tonight, I am 100% in the G Fund. Its a good feeling. The market is encountering more turbulence. The futures are down 6.90 points on the S&P 500 Index. Mondays are known as "Mutual Fund Monday." Markets experience a predictable inflow of new money from the retail public on Mondays. As a result, there tends to be a pattern of up days on Mondays. I would not be surprised if the market opened low and closed high.

What I'm really interested in is whether the market dips below the 13-day moving average. The 13-day moving average now sits @ 1159.72. If we see a dip below that level, then that dip will be red flag number 2. I would view it as a cautionary sign that its time to leave the C Fund for now.

The main teaching point this evening involves moving averages. Moving averages provide predictable levels of resistance, until they are broken convincingly to the upside. On the weekly chart, there is a sharp 200-day moving average line @ 1196. That line isn't going anywhere any time soon. Certainly, it's not going to be broken on the second attempt. (See George Angell, Winning in the Futures Market: A Money-Making Guide to Trading Hedging and Speculating, page 218 "Typically, if support or resistance is going to be broken, it will be penetrated on the third test of the low or the high.")

The odds favor the Bears for now. As I was walking through a bookstore yesterday, I saw a cover of MONEY magazine. The cover headline read "The Bullish Case for Stocks." I took this cover headline as further confirmation that storm clouds are coming.

Good luck with your investing!

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