All Indexes close at All Time Highs

Good Evening

I am leaving G-Fund and will be 100% S-Fund until further advised.  All market indexes closed at All Time Highs, with the SP 500 closing at 2198.18, above the previously discussed 2190 level.  Volume, while not above average, was sufficient enough, in my opinion, in light of the holiday week, to return to stocks.    The best performing stocks are Small-Cap stocks, aka S-Fund.  Observation:  In a new bull market, small caps always perform best.  Then towards the end of a bull market, large cap stocks outperform.  So some theory exists that we may be seeing a new bull market phase underway, in the beginning stages.

In looking at multiple other indicators, I have nothing to tell me to remain in G-Fund.  I have looked, trust me.   Everything that I use tells me to return to stocks.   As such, I am returning to stocks, via 100% S-Fund.

Thank you and Happy Thanksgiving

-Bill Pritchard

New Bull Market or a Trump Rally ?


Good Afternoon Folks

Hope all is well…today is Nov-19, and we are approaching the customary two-week mark after my last update on Nov-8.  Time to push out a new update in light of the Thanksgiving Holiday coming up.  Note that this is my first post-election post.

First (or BLUF as some would say), I remain 100% G-Fund.  I have received some “inquiries” (nice way of saying it…) as to my logic, in light of a pretty strong rally post-election, so maybe on today’s post I can explain things a little bit more.

The reader may recall my pre-election analysis, and my accurate and correct prediction that Donald Trump (DT) would win the election, a prediction which was published on Nov-8 at approximately 10:39 PM Central Time, and “against the odds” as reported by polls and major media outlets, who prophesied that Hillary would win.   As DT scored wins during the night, the Dow Jones Futures plummeted and Miley Cyrus sobbed.  Note that since Nov-2, I had been tucked safely into bed via the G-Fund.  Let’s take a look at the charts after the election:



While we saw a pretty big rally the days after the election, things kind of subsided a few days afterwards, with volume declining.   Note that a 1.7% Daily Gain or greater, on above average volume, is needed, on the broader market indexes (Dow Jones, SP 500, NASDAQ), to really change the direction of the markets.  We did indeed have above average volume, but we did not have the 1.7% gain.  Also, my benchmark “market health” index, the SP 500, is basically in the same place today as it was in August, aka the 2180 area.   See chart:


With all of that said, one may conclude I need to be more positive and embrace the Christmas Spirit, and wish for TSP cheer this holiday season.   Fear not, as I have plenty of reason to do so:   With DT elected, we have the potential for reduced regulation in all aspects of life, which will help business growth and expansion.   DT is apparently surrounding himself with folks with very strong resumes, and may be a subscriber to the “surround yourself with smart people, and turn them loose” theory of management.  With a Republican President, a Republican Congress, and some new agency heads being ex-Congressmen, one would think we can finally get something done in Washington.

Note that the stocks that rallied after the election were mostly all Dow Jones index components, I called this the “Trump Index” because everything else was flat.   The industries that rallied, per Bloomberg, are evident in this graphic:


The currently top sub-sector of the market is the Small Cap stocks, aka S-Fund, which indeed zoomed higher so far, since Nov-8.  However this is the same index that can crash hardest, if this rally is short-lived.   For those who are in the S-Fund, congratulations to some well deserved gains.   However, in my opinion, caution is the word of the day, as DT chooses his team and the market digests the new administration, which does not even begin until Jan 2017.  In other words, if the market is beginning to tick upward now, we may have a great next four-years.

I am closely monitoring the SP 500, I want to see a close price of above 2190, and I want volume to get a little stronger.    See chart:



2190 is an important resistance level, the good thing is, is that I think we can breach it soon.  If that occurs, and if volume starts to pick up, I will likely exit the G-Fund and return to stock funds.  Until the market itself tells me otherwise, I will remain in G-Fund.  Expect light trading volume next week due to the holiday, market will likely be flat.  FYI

That is all I have for now, Happy Thanksgiving and safe travels !

-Bill Pritchard




Predicted Winner = Donald Trump, Dow Jones futures down 600 points


Good Evening

My crystal ball at 10:30 PM Central Time on 11-08 is predicting a Donald Trump win for our next President.  This is due to:

  1. Hillary narrowly won Virginia, with 48% versus Donald 46%.   I consider this narrow because Hillary’s VP, Tim Kaine, is former mayor of Richmond, the capital, is a former Governor of the State, and a former US Congressman from the State.   You would think that Virginia would have been a “done deal” for her yet DT almost snatched it from her.  I consider this important as it likely represents the sentiment nationwide, regarding a desire for change.  If he can almost take Virginia, he can own most anything else.
  2. Donald is on track to win Florida, yes narrowly but in light of all of Donald’s tough talk on immigration policies and the anti-DT energy by the Latino community, this is commendable that he was able to seize Florida.  Again, if he can “pull this off” then his power has previously underestimated.  Note:  not declared official win yet.
  3. North Carolina and Ohio, believed to be critical for Hillary, just went DT.
  4. He is pulling this off by himself.  Hillary has Obama and ex-POTUS Bill Clinton (basically two Presidents) on her team who have been out cheerleading for her.  Yet DT is still able to perform.

In sum:  I anticipate Donald Trump as our next US President.   The overnight futures markets (we saw financial markets celebrate a no-criminal prosecution on Hillary a few days ago) reacted violently, with Dow Jones Futures moving down 600 points.  The world financial markets are clearly worried by a DT victory, and his strong stances on various issues.   See chart:

dow-jones-futuresRecall that on Nov-2, I posted my TSP change over to G-Fund, out of an abundance of caution.   Six days later, we are in an election where the “underdog” has (so far) knocked it out of the park.   Additional volatility is expected, as is a possible last minute surprise Hillary comeback, although I doubt it.   Again, my move to G-Fund was out of caution, and dare I say it,  I am rarely wrong or incorrect with market calls.  Here we are, yet again, with storm clouds and heavy rain looming ahead, and I sought shelter early.

There are other TSP analysis sites out there, both free and paid, my opinion is those sites have been very reckless and irresponsible advocating anything but G-Fund in such a volatile period, with obvious market signals of a downtrend.  Maybe obvious to me, but not them.  “It is just a paper loss” is only heard when they lose money, however when the same sites magically cause a gain to happen [even a broken clock is correct twice a day], you never hear that it was a “paper gain.”  No, that is never heard.   We have a lot of smart subscribers here, many who have been with me for years, use your sound judgement when you come across those other sites and snake oil salesmen.

Will the markets come back ?  Sure, they “always do” as many like to say, many even remind me this.   “Always do” however carries an unknown timeline to it.  They may come back next week, or next year.  I am unwilling to catch falling knives or ride in cars that are flying off cliffs.

I remain 100% G-Fund until further notice.  Thanks for reading !

-Bill Pritchard


Pre-Election Day Market Analysis

Hello Everybody

If there is any doubt what candidate the markets favor, that doubt was cleared up on Monday Nov-7, when all indexes rallied strong, with the often watched Dow Jones Index gaining 371 points.   However volume was lackluster and this was indicative that institutional investors were not behind the Nov-7 rally, and instead it was “dumb money” versus “smart money” at work today.  Lets look at some SP 500 charts:



Apparent is that the volume was lower than the prior trading day volume (that day would be Nov-4), also apparent is the volume was noticeably less than the heavier “sell off” days of Oct-27, 28, Nov-1, 2.  Such sell-offs basically need same, or greater, volume, combined with a gain in the index, to “overcome” those prior down days.  None of that occurred today.   As evidenced by the below chart, the SP 500 is in a downward “channel“, based on deteriorating price action causing the trend to slope downward, this channel is determined by taking recent highs and recent lows and establishing trendlines:



The SP 500 is basically operating with a sloping overhead resistance line of 2150, and a sloping support line of 2070, it is bouncing within the confines of this channel like a pinball.  A break-thru of these lines, combined with high volume, is indicative of a probable continued move in that direction.

In summary:  A rally such as today is always welcome.  However further inspection reveals not all is what the cover of the book would lead you to believe.

I remain 100% G-Fund until further notice.   Thanks for reading and talk to you soon.

-Bill Pritchard




Cautionary move to 100% G-Fund


Hello (Nervous) Readers

I know it is time for an update when my page views hit record levels, the count has increased every day as we get closer to the election, as has my inability to sleep and an increase in blood pressure.  I have said before, if you can’t sleep at night because of your investments, you need to “sell until you reach the sleeping point.”  With that said, my personal stock choices have really done well, they are a few technology names which I will not mention here but I am quite happy with.  I can also have them go to zero (while not desired…) and still pay my mortgage, so it is “hobby money.”   Our TSP accounts, however, are critical, for retirement income and peace of mind, and we cannot roll the dice with those.   So as my former Supervisor liked to say, BLUF (Bottom Line Up Front), I am moving my TSP to 100 % G-Fund, both Contribution Allocations and Interfund Transfer.  Note that per the TSP Website, changes made on the TSP website or the ThriftLine before 12 noon Eastern time are generally processed on that business day.  Requests made after 12 noon Eastern time are generally processed the next business day.  In short, any change made on Thursday Nov-3 should be fully processed by close of business Monday Nov-7.  The election is Nov-8.

Allow me to discuss my views of the markets and shed some light into my decision.   We are arguably in one of the most important elections in history, and clearly the broader markets, worldwide, are nervous.  No matter what party the voter identifies with, or what candidate he/she favors, everyone agrees that this election is important, due to a variety of domestic and international issues not seen before.  Gold Prices have recently ticked upward, which is consistent with “safe haven money flows” as major institutional investors exit equity/stock positions and seek “safe haven” for their money.   Not everyone is moving to Gold, some are moving to other investments, investments which are not really possible to determine but there is no question that major investors are exiting stocks.   As we know, “stocks” for TSP purposes are the C/S/I/some portion of L-Funds.    This movement out of stocks creates additional supply of shares on the markets, and thus pushes prices down, as at the end of the day, the stock market is an auction market, and it is supply and demand driven.  Yes, “earnings moves stocks” but earnings (good or bad) actually cause people to buy or sell stocks, and that action is what moves stock prices.   But lets not get tripped up over semantics here.   Visual explanations are always a good thing, so lets look at the SP-5oo Index charts:




Evident in the above charts, is increased selling and downward trending action which began on Oct-25.   This is the same date that some additional news associated to the Presidential race/election was released.  Also evident is the index broke below its previously discussed 2120 level, and is now below lows established in mid-September.  Since Oct-25, we have seen above average selling/distribution volume on the SP-500 Index, with a distribution day count of 8.   Lets take a look at a chart of Gold Futures, you will see the sudden price uptick, commencing in late October.



Note that 4 to 7 Distribution Days in the stock indexes are enough to trigger concern, and any exceedence of that count (like now) is cause to ask “OK, why should I remain in stocks?”

As such, with a pretty major catalyst (political change, see my FAQ #6) in the works, an elevated distribution day count, and inflows to Gold (as demonstrated by its rising price), I will sleep much better right now if I move 100% G-Fund.

After the elections, stability may return to the markets, and I may return back to the stock funds.   Any triple-digit gains the morning after elections (please don’t email me and lambast me about “missed gains”)-  be careful and don’t count your chickens before they hatch, the markets have a unique ability to trick the investor into doing something he may regret.   I am going to step back, monitor the situation, and will not return to stock funds unless I am comfortable.

All my opinion, and subject to being wrong, but right now I would like to catch up on some missed sleep.   Thanks for reading and talk to you after the election !

-Bill Pritchard

FOMC Minute Analysis / Markets remain Volatile


Hello Everybody

Well, here we are again, where I find myself unfortunately reporting that the markets remain volatile, and largely Federal Open Market Committee (FOMC) driven.  You can look at the mainstream financial media for their own assessment of the FOMC Minutes, or you can read mine, the important parts highlighted in yellow, with my commentary in red, at this link:  fomc-minutes-9-21-16

The SP-500 Index remains bound by the 2120 support level and a recently developed 2170 overhead resistance level.  Please see charts:


You can look at the above charts and identify the sideways action from July 18 until present coincides with my lack of major reporting activity on this website.  It is almost as if Wall Street thinks it’s still summer.  We have been sideways since July, with some red flags along the way.

Any penetration of the 2120/2170 levels is cause to believe the move will continue in that direction, obviously the move downward, thru 2120, is more worrisome than any move upward, which I would be happy to see.  Indeed the market has had numerous “distribution days” in recent weeks, and remains problematic.  Markets sold off drastically on 10-11-16, on above average volume, a troubling sign.  On 10-12-16, the markets recovered somewhat, however on lower volume, possibly influenced by the Jewish Yom Kippur holiday, in which some market participants were not trading, resulting in lower volume.

In addition to the FOMC minutes (further analysis at above link), we have arguably the most watched (indeed the most Tweeted…) Presidential Election in history, and different schools of thought exist as to what candidate will benefit the market.  What is known, is that the markets do not like uncertainty, so once we are past elections, we hopefully will see some upward progress, when “new blood” is in the White House.   The below chart reflects some Polling Data (if you choose to believe it is credible)


There is no doubt in my mind that two hot items remain the catalyst behind the market volatility:  1) Interest Rates and 2) Elections-  no larger, headline issues exist from an economic standpoint, at least none that I can see.  With that said, at the end of the day, we must respond to the market itself, not our crystal ball or our gut feelings, etc.  For now, the market itself is having challenges making upward progress, and any penetration below 2120 will be concerning.

Until then, I remain 50% S-Fund and 50% C-Fund.

Thank you for reading and talk to you soon !

-Bill Pritchard



As Previously Discussed – No Rate Hike


Hello Everybody

As I predicted previously on this site, no rate hike happened at the Sept 20-21 FOMC Meeting.  Inflation targets of 2%, have not been achieved (this too, has been discussed on this site, numerous times…), and thus this appears to have been the primary factor for the lack of a rate hike.  At the 35:40 time mark in the video, 2% inflation is pretty strongly mentioned, if you are a Yellen watcher like I am.  Full video is below:

The indexes responded very positively to this, with the often watch Dow Jones Index closing up 163 points for the day.   The tech-heavy NASDAQ attained a new All-Time-High (ATH) of 5299.40.   See chart:


International Stocks (I-Fund) responded best to today’s news, next was Small Cap stocks (S-Fund), then large cap stocks (C-Fund).   I personally am not participating in the I-Fund, but it indeed offers greater rewards (and risk) than the other funds right now.

Lets take a look at the FOMC Statement, issued after the meeting.  This is not the same as Ms. Yellen’s transcript, it is more of a summary of the FOMC overall sentiment:

Information received since the Federal Open Market Committee met in July indicates that the labor market has continued to strengthen and growth of economic activity has picked up from the modest pace seen in the first half of this year. Although the unemployment rate is little changed in recent months, job gains have been solid, on average. Household spending has been growing strongly but business fixed investment has remained soft. Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will strengthen somewhat further. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Jerome H. Powell; and Daniel K. Tarullo. Voting against the action were: Esther L. George, Loretta J. Mester, and Eric Rosengren, each of whom preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

It is evident that the FOMC is pretty set on achieving 2% Inflation, and without this achievement, I do not see rates being raised.   The next meeting with a possible rate hike is December 13-14.

On Friday Sept-23 12PM Eastern Time, Federal Reserve Bank of Philadelphia President Patrick Harker, Cleveland Fed President Loretta Mester and Atlanta Fed President Dennis Lockhart participate in “Presidents’ Perspectives: The Fed’s Role in Our Communities in Philadelphia.   It is possible that interest rate discussions (but no action can be taken, this is merely a forum) will occur at this meeting.

Interesting is that the same talking heads on the cable business shows, to include major fund managers, all who erroneously “predicted” a rate hike to occur this September meeting, are now backpedaling and now claim that triple cross your heart, that a rate hike will occur in December “for sure.”  I suppose even a broken clock is correct twice a day.

Thanks for reading and talk to you soon.   Thanks for being a supporter.   I think I have analyzed these FOMC meetings for 2 years now and each time I “called it” with 100% accuracy.  Just saying…

I remain 50% S-Fund and 50% C-Fund.

-Bill Pritchard





September maintains volatile Reputation


Hello Folks

I typically don’t put out updates over the weekend, however I wanted this past week to “close out” before I did any analysis or assessment of things.   We are two weeks away from exiting the historical stock market storm system, with associated turbulence and foul weather, called “September.”   As discussed in prior posts, September is a month of poor performance and high volatility (huge price swings), and it apparently has chosen to keep its reputation this year.

This year’s September turbulence has two additional fuel sources, known as: 1) Presidential Election and 2) Interest Rates.   As most realize, this is a very tight Presidential race, charged with emotion and with both candidates touting their own economic plans for the country.

Regarding Interest Rates, it is my opinion that the rates will not be raised at the September 20-21 Federal Reserve Open Market Committee (FOMC) meeting.   You can read (if you are having trouble going to sleep) some of my theories and opinions on this matter via the search box on this site, however bottom line up front, the Jobs data and Core PCE Inflation data, is not where it needs to be, if the FOMC adheres to past policy statements made before Congress and at official press releases.  Now, I suppose they could wake up one morning and deviate from those previously stated positions, but I am not sure how that would work out, even more so if you consider the tight campaign polls and other “backdrop” issues.

News did come out on Sept-16 regarding the Consumer Price Index (CPI), it rose 0.2% in August.   This prompted some to speculate that this would be fodder for the FOMC to raise rates in September, but I get very frustrated by these sentiments, I wish those folks would review the public policy statements by the FOMC and adopt my conclusions.  In addition, I would hope the FOMC would not take data received in September (the August CPI data) and take action on it less than 30 days later, an action with global implications.  As I sit here typing this, I feel that the belief that August CPI will cause rates to rise in September is an absurd idea.

The SP-500 Index has had quite a few large swings, starting with the huge drop downward on September 9 on heavy volume.  Note:  No doubt, we have seen selling/distribution, on above average volume, with down-trending action, this month.  None of which is desirable.   Lets take a look at the SP-500 Chart:



The 2120 level is the new support level for the index, as apparent in the chart (red horizontal line), the index has found support there and closed above that level (thankfully) during last week’s trading.   Any penetration down thru this level will be worrisome.

Yet again, the market action is “all about the Fed” (FOMC) and in an apparent cycle of lily pond jumping, the market’s big moves are all jumps from one FOMC lily pad meeting to the next one, with relatively flat action in between.  We need a larger, more powerful force to sustain these trends, a force which apparently is non-existent right now.  The next interest-rate events are the Sept 20-21 FOMC meeting (press conference will occur on Sept 21) and a panel/forum of Federal Reserve presidents will occur in Philadelphia on Sept 23, called the Presidents Perspectives Forum.   I am quite certain that interest rates will be discussed directly, or at least alluded to, at that forum.

I remain 50% S-Fund and 50% C-Fund.

Please continue to share this site with your friends and colleagues, I appreciate the great email feedback, thank you very much.  Thank you for reading and talk to you soon !

-Bill Pritchard


Trendless Markets since July


Hello Folks

As expected (predicted?) the markets have remained in a mostly side-ways trend, or lack there of, since July.  I spoke earlier regarding the fact that August and September are historically weak months-  the markets are living up to that reputation.   Lets take a look at the SP 500 index, as can be seen, the index is basically flat, bound by 2194 as overhead resistance, and 2147 as a support level.   Any break/penetration of those areas would give reason to believe the subsequent action will continue in that direction.



Observe that volume has been fairly quiet since mid-July, however we indeed have had some minor selling on above average volume, as indicated by the black circles above.  Chalk this up to “summer doldrums” as I see no signs of heavy, institutional selling which we did see back in the BREXIT Panic of June.  Note that even in light of that, me personally, back in June I saw no reason to bail out of stock funds and was confident that things would return to the upside (which they did).

Now that we have talked about the recent action in the markets, lets move forward to what is in store for the near future.  On Sept-2, at 8:30 AM Eastern Time, the most recent “Jobs Report” will be released, many in the financial world believe this will set the stage up for a possible interest rate hike at the September 20-21 FOMC meeting, or possibly at the December 13-14 meeting.   Most economists are forecasting that 180,000 jobs will have been added.  With that said, the consensus is that unless the jobs report is “out of the park”, meaning 225,000+ jobs added (reflected a 25% improvement on the expectation of 180,000), then there will be no fodder for a rate hike.   Observe that we are still in the “bad news = good news” market climate.   If we get “bad news” such as 175,000 jobs added, below the expectation, the markets will rally, due to no rate hike, if we get “good news” such as 250,000 added, the markets will likely tank, due to a looming rate hike.  Ideally we get a jobs report of 175-185,000 and an unemployment rate no less than 4.9%.  I say 4.9% because that was what last month’s rate was.   Any rate less than that, aka 4.7%, would reflect an improving economy and give the FOMC additional horsepower to raise rates.  A rate higher, aka 5.1%, would reflect a worsening economy, which is not a good sign either, long-term. 

Further note that (discussed on this site previously) the FOMC is mostly using two criteria to determine rate hikes:

1.  Jobs/Unemployment Rates – Mostly flat in 2016, minimal improvement.  Graphic:


2.  12-Month Core PCE Inflation target of 2% – No improvement. Graphic:


So in my opinion, we will see no rate hike at the September 20-21 FOMC meeting, especially if you include the fact that we are voting for a new President in November, and it is unlikely the FOMC will receive any green-light, tacit, implied, or otherwise conveyed, to raise rates, until the new President is in-place.   Indeed we could see a minor rate hike in December, due to this very reason.   Did I say this was all my opinion ?

In other news, the FEGLI Life Insurance Open Season has officially begun, Sept-1 to Sept 30, information at this link:

Just as an FYI, but if you fall into the below categories, double check that your non-FEGLI life insurance will cover you (aka pay money if you get killed), as many will not.   This is a common statement many have told me, they don’t have FEGLI because they have “cheaper insurance” via another company, which may not pay if your death is:

  • Ops in War or Combat Zones, etc.
  • Flights on non-commercial/non-airline flights or on any non-FAA registered aircraft
  • Outside of USA
  • Death for any reason, to include suicide.  In other words, insurer cuts a check “no questions asked”

As a reminder, consult with your own HR department, financial advisor, etc. in regards to life insurance planning, but this question comes up quite frequently and I wanted to put it out for general awareness.  You may be shocked at the situations non-FEGLI insurance will not pay.

That is all I have for now, I apologize for the length of time between updates, but as the above charts show, nothing of mention is happening in the markets.   Once we get past September, hopefully things resume to the upside.

I remain 50% S-Fund and 50% C-Fund.  

Thanks for reading and talk to you soon !

-Bill Pritchard


August and September historically weak Months


Hello Folks

Excuse the slight delay in updates, but I took some vacation time and was out visiting the Silicon Valley area in July (San Jose, CA area) on a vacation-and-research trip.  While out there, I was fortunate to have dinner with some folks who are employed in the tech sector; I am quite impressed by that sector (Semiconductors – General Computer/IT – Networking/Communications/Internet).  I feel that the way we live and operate today, in 2016, will be largely improved, and made easier, in the next 5 years because of this sector.  In support of this trip, I flew Virgin America (VRD), to evaluate their product, and honestly to “try something new.”  It should be noted that Alaska Airlines recently announced that they will merge with Virgin America, however they are unsure on whether they will merge the actual brands (paint the VRD planes in Alaska colors, etc) or not merge the brands.   My opinion is (Hello, Alaska?) do not merge, as the VRD product is very unique, and high quality, at a price point (out of Dallas Love Field anyway) competitive with the major airlines.  The brand carries a cult-like following of customers and fans.  If it is not broken, don’t fix it.

With that said (the above demonstrates that I was out “working” for my subscribers, not just goofing off and sight-seeing), small cap stocks (S-Fund) continue to be my favorite area.  Preliminary TSP data reflects that the S-Fund was the top July performer, with a 5.4% return, with the next best performers being I-Fund/5.07%, and C-Fund/3.69%.  Me personally, I-Fund is not worth the risk, so for me, I will remove that from consideration, with that said, my opinion is the 50/50 S and C-Fund allocation represents the ideal allocation mix for my TSP Account.

August begins a historical “worst 2-month pattern” for the stock markets, as August and September are indeed poor performing months, over the last 30 years or so.   I have had some readers reach out and share some concern that “the market is selling off” – this is normal for August.  Expect a listless August, and worse September, if history is any guide.  See graphic:


Place a down August in the “Ops Normal” column, and don’t lose too much sweat, unless volumes drastically go thru the roof and more aggressive selling occurs.  Let’s look at some charts, first the SP-500 Index itself, then the SPY Exchange Traded Fund, which is helpful for volume analysis:



As is evident in the charts, the period of July 18 to August 1 was basically flat, with minimal volume action.  Apparently Wall Street goes on vacation in the summer (like everyone else), as volumes were very quiet.  Then on Aug-2, we had a sell-off, but again, this is historically not abnormal for August.   In fact, the first nine days of August typically are sell-off days.  Note that the sell-off volume observed so far was only slightly on above average volume.  Do we move to G-Fund, if we already know that August and Sept are poor performers ?  Negative Ghost Rider.  G-Fund is the 911, Hurricane Shelter, safe haven, used for protection, when a bear market is probable or severe decline is pending.   I plan to remain fully invested in stock funds during Aug/Sept.  Recall I remained in stock funds during the entire BREXIT debacle.  Stocks recovered just as, dare I say, it, I expected.  However, others felt differently:  Federal News Radio is reporting that $2.1 Billion in TSP funds were shifted to G-Fund after the BREXIT vote.   Humorous note:  These were not likely my subscribers……  

Hopefully I have pacified some nervous folks; let me wrap this up with the observation that the SP-500 made an All Time High on Aug-1, reaching 2178.09.  This is great behavior, and strength begets strength.   I did have some folks ask the very legit question “Isn’t it too high now, I am worried things will crash” but remember you want to invest on the strongest performers, not the weakest.  You wouldn’t invest in real estate in a neighborhood with crashing home values would you (well, I wouldn’t….) ?   And being “too high” is very subjective, as we simply want to ride the wave until it goes the other direction.   And a “rest” is normal, even NFL superstar running back Walter Payton had to sit down and take a break at times.   Nobody worried that his proven, demonstrated, historical, track record would suddenly stop when he sat down and took a break.

Observation:  Pro-athletes, and markets, reach the end of their cycles at some point, (athletes typically retire, markets retreat) but I am very optimistic for the rest of this year.  I feel that the elections in November will give the markets some horsepower to go higher, as it represents a change of the old-guard, over to a fresh, new team.   We all know it will happen (a change) but the energy of the election, a new President sitting in the Oval Office, and a new team, should serve as combustion for a new uptrend.  New, new, new.

That is all I have for now, unless something hot and urgent comes across my radar, I will likely be in quiet-mode for the next week or two or three.   Again, Aug-Sept are historically down months, with things clearing up after that.  My personal TSP Allocation remains 50% S-Fund and 50% C-Fund.

Thanks for reading and talk to you soon…

-Bill Pritchard