8-11-10 Indicator 2 Change Alert

Market Timing Indicator Change Alert

We’ve been close to a new “DOWN” signal in Market Timing indicator #2 for the last few days, but I was waiting for a confirming move down before triggering the “DOWN” signal.   Unfortunately the “confirming move” came in the form of a 265 point DOW drop today, meaning that a significant part of the move down may have already occurred.   Nonetheless…

With a close on Thursday 8/12/10 of the S&P 500 below 1087 Indicator #2 will move to DOWN. 

Some VERY short-term indicators that I monitor (but don’t publish) are very close to an upward signal, creating a conflicting situation.   I would expect some type of upward move by Monday ‘s market close.  If the Indicator #2 does move to DOWN we could see a quick change back to UP after a few days.   

How I’ll handle this situation:

I’ll sell about half of my positions with an S&P market close below 1087 on Thursday, leaving me 30-35% invested in stock funds and the rest cash positions.  I’ll watch the market (and our indicators) from there.

If the market closes over 1087 on Thursday, I’ll hold my position of about 50/50 stock funds/cash.

Interesting note:  the S&P 500 is right where it was at the first week of May – the day after the “Flash Crash”, meaning the market has been moving sideways for over 3 months now.