Increasing S&P Exposure

I can see a large Cup and Handle pattern forming in the S&P500 (^GSPC). This is a very bullish sign.

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This formation also formed in November 2010 and triggered a three month long rally that saw the index rise from 1,200 to 1,340 (12%). Based on this I am going to rebalance my bonds from 30% to 25% (the minimum in my policy) and transfer those funds to my S&P fund. The S&P fund will now make up around 18% of my portfolio, which is still quite modest, and in line with my Investment Policy.

  • Sell Bond Fund @ $216.85
  • Buy S&P Fund @ $115.03

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The 50 day moving average is above the 200 day. The index also broke above the 50 day. These are bullish signals also.

The net result of this trade is that my asset allocation will be:

  • 25% cash
  • 25% bonds
  • 6% gold
  • 44% stocks

POSTMORTEM

Writing today, 25th May, this looks like a bad call.  The S&P500 is down 6% and my bond fund is up around 1%.  This is a 7% loss on this trade.  Every time it try to predict when to move from bonds to stocks (or vice versa) I get it wrong.  I should probably stick to a more simple bond allocation (e.g. bond percentage = age).

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