1. Tremendous buying pressure from 4th October onwards leading to 10-12% gain in few days
2. High bearish sentiment and strong skepticism of this rally attempt
3. Earnings season in the play
4. Relatively good news from Euro-zone to stabilize looming financial crisis (for now)
As an average investor how am I suppose to know all this!!!!
Well, it is not necessary to know all this but always good to be aware of our surroundings as today's financial markets are global and react very fast to news. As long as we follow our history teacher (BPNYA Index) we should be in good hands.
Let's look at the BPNYA Index chart below:
1. BPNYA index crossed EMA(30) upwards but since EMA(30) is below both MA(50) & MA(200) and MA(50) is below 35 its a NO BUY signal.
2. In a day or two EMA(30) crossed MA(50) upwards giving us confirmed BUY signal.
You can use market timing tool in the downloadable spreadsheet to get above information.
Remember, markets can do what they want and hence there is no guaranteed way of knowing this. But based on reasonable assumptions and reasoning, this is what we feel. This rally should continue as shown by dotted line, till end of earnings season (end of October). After earnings season, soon we will come back to US debt reduction effort by 6 member congress committee. We all know what happened in August and same shall be the case this time as well. This will be the trigger for market decline in early-mid November onwards. In short we expect the rally to last for a month or so...
What does it mean for our Long Term Funds!!!
401K/HSA/College Fund: We get the BUY signal last week, and any pullback will provide us an opportunity to get back in the game. We enter the highest ranked Mutual Fund available to us. You can find the highest ranked Mutual Fund by using the spreadsheet available here.
Traditional IRA/Roth IRA: Based on our "Advanced Strategies" section we should be using our BULL market ETF list now that we have the BUY signal and invest in the highest ranked ETF.