Out of the C Fund @1300, Into the G Fund

Since May 1, 2011, the market has been drifting downwards. The character of the market has changed. Since August 2007, buying the market at the bottom of the 10/20/40 week cycle has worked like clockwork. It produced a wonderful buy opportunity in August 2007, March 2009, October 2009, and August 2010. This time, the cycle time frame did not provide a solid level of support. This means the market has changed in a fundamental way. When the character of the market has changed, it is best to stand aside.

In addition, the market dropped in a five-wave move since May 1. The market has not dropped in a five-wave fashion since July 1, 2010. This is another sign that the market has changed from an up trend to a down trend.

Moreover, there is a triple negative divergence between the price action of the S&P 500 Index and the MACD line since the November highs. This is another sign that it is time to go for now.

Stepping back and looking at the big picture, the future does not appear bright. Congress continues to hem and haw on raising the debt ceiling. If the debt ceiling is not raised by August, the U.S. Government will run out of the money and the market will drop. In addition, an analyst that I follow believes that the end of quantitative easing this month will mean the resumption of the Bear Market from 2008. I am also leery about the long-term impact and effects of the Japanese earthquake, not to mention the debt situation in Europe.

Finally, I am a believer in the force of demographics. Many baby boomers will be retiring this decade. They will be cashing out pensions and 401(k) plans. This cashing out will place additional pressure on the markets.I could easily see a long-term market drop into 2016 based on the aging of the baby boomers alone.

When in doubt, get out. It is time to step aside for a moment.

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