The McClellan Oscillator turned down hard enough today to warrant a caution signal to short term traders.
I do have a bit of concern about the stochastics only managing a move just above 50 before potentially turning down and thus the main reason I am only looking to bump up to 80% equities on this potential weakness. Had this indicator been more healthy then there would be no question that my next stop on the allocation map would be the land of 125%.
However, I want to be 100% sure that a major intermediate term bottom is in place.
I am sitting at about 90% certain, but as I said, if the stochastics roll over from just above 50 we will have to keep a very watchful eye on the substance of the ensuing decline.
Todays wild roller coaster ride brought confirmation to the micro short term model that the first micro short term leg completed with the sharp rally after the FED announcement.
This would bring into play a correction of this entire move from the lows near 1270 with 1328 being the most logical target for the end of the decline.
No question that yesterday was a good day to unload any ultra short term long calls or stocks that were picked up near the lows.
Short term traders should continue to hold cash and await an opportunity to jump back onto the long side of the market.
Intermediate and Long Term traders should embrace this potential decline as an area to increase their equity exposure and seeing as the three line break sentiment chart turned up yesterday it really clears the path to increase your equity exposure up to 80%.