Market made a monstrous move last week after European union seemed to have come to some resolution regarding debt crisis. However, it was risky period as market could have tanked without any Euro resolution. If you were not invested in market last week then you did miss a big move indeed. Oct 2011 is a historic month where we witnessed 17-20% gain in any index in a single month. This unusual phenomenon happened after 1974 when such huge move was recorded last time. Now the big question is how far will this rally continue!!! In our last weeks post, we mentioned that anyone who missed the rally so far will be very eager to get in. This should fuel the rally for another two weeks, until mid November. By then the earnings season will wind down and the focus will be back to US debt reduction effort by 6 member Congress committee. We haven't seen any progress so far and most likely, it will be typical tug of war between Democrats & Republicans. Eventually, this will lead to downgrade of US debt by other rating agencies especially if NO major effort is seen in reducing US debt. By this time, the market is in another roller coaster ride and its downward trend will resume. Lets look at BPNYA Index current chart: As we can see from above chart, we got in the market at right time and captured the up move. Soon BPNYA will cross above 70 which will be our clue to get ready to exit out. As soon as EMA(30) crosses MA(50), our SELL signal is generated, however remember this is late SELL signal. One can also exit out as soon as BPNYA crosses EMA(30) considering it as early exit signal. You decide which signal you prefer!!! As long as, BPNYA remains above 70, historically market has only managed to rise another 3-4% at maximum before a significant correction. Lets look at NYSE Index chart: As we mentioned last week, we should see another 6-8% gain in the market. We are right on track in meeting that target. Soon we will cross 200 MA, usually that is very bullish sign and more people will get sucked into the rally in the expectation that market is rebounding hard and no one wants to miss the further upside. Well now imagine, this is a perfect setup for market to penalize maximum people, Isn't it!!! ONLY time will tell...
For now enjoy the market upside until we get SELL signal. What does it mean for our Long Term Investment Accounts!!! 401K/HSA/College Fund: We are fully invested by now in 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 are fully invested in ETFs using our BULL market ETF list and invested in the highest ranked ETF. Comments are closed.
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