Aug 7 Update – I am 100% G-Fund

Tonight August 7 , per public news sources, President Obama authorized military air strikes in Iraq.    A review of both the markets since August 1 (the last update to this site, released in evening July 31) and the behavior of the SP 500 evening futures (likely “in response” to Mr. Obama’s announcement), has caused me to return to 100% G-Fund.   Note that the Ukraine situation is ongoing, as is the Gaza/Israel situation.   As stated before, “we are in challenging times” right now.

As previously discussed, on July 31, Argentina defaulted on its debt.   I argued that “Argentina didn’t matter” and I believe I was largely correct, however the indexes continued to go lower.   On August 1, the Department of Labor released data reflecting a 6.2% unemployment rate.   As discussed previously on this site, improved unemployment rates below the 6.5% threshold level are believed by many to be the “green light” that the FOMC needs to raise the Federal Funds Rate.   We now have a guaranteed future rate hike, as prior unemployment data has shown a continued trend of improvement, versus a one-time data anomaly.  Furthermore, “rate hikes” are not welcomed with open arms by Wall Street, and this will continue to cause additional indigestion for the markets.  The next rate hike will likely occur in Summer/Fall 2015.

Also, since August 1 (a mere six days ago), the Gaza/Israel and Ukraine situation has grown worse, or at the minimum, not improved.   This has caused additional heartburn for the markets.

Lets look at the long-term chart of SP 500, a one month chart of the SP 500, and charts of the SPY ETF which tracks the SP 500 Index and is helpful in order to monitor volume activity.   Comments are on the charts themselves.    Important to note is the 1930 level on the SP 500 has been penetrated to the downside and the index has not shown a desire to resume its uptrend.    Also important to note is the overall uptrend of the market, existing since early 2013, is still largely intact (and why getting on and off the “train” is fine, as long as the train is still going in the direction you want).    However it is my opinion that greater, more severe, pain may occur in the markets in two to four weeks.   I am getting off the train, which appears to be slowing down.   As the train slows, I am jumping off now (and maybe twisting my ankle and getting some bruises) versus remain a passenger, as the train approaches (a possible) a fallen bridge a few miles ahead and plunges into the river below.

SP 500 longrange 08 07 14 300x179 Aug 7 Update   I am 100% G FundSP 500 longrange 08 07 14 comments 300x179 Aug 7 Update   I am 100% G Fund SP 500 08 07 14 300x179 Aug 7 Update   I am 100% G FundSP 500INDEX 08 07 141 300x179 Aug 7 Update   I am 100% G Fund

Lets take a look at the SP 500 futures evening session.   Note that the only major event I can associate with tonight’s sell-off is the news announcement regarding airstrikes in Iraq.

SP 500 FUTURES 08 07 14 300x300 Aug 7 Update   I am 100% G Fund SP 500 FUTURES 08 07 14 comments 300x300 Aug 7 Update   I am 100% G FundIn summary, I am going 100% G-Fund (request submitted tonight, will likely not take effect until Monday) for the time being.   In addition, I am placing tight sell-stop orders in my personal brokerage account, regarding my personal stock holdings.

Thanks for reading !    This post done via my MacBook (TDY right now…) so some graphics or text may end up looking different from prior posts.

Please share this update and my free site with others who may find it useful or interesting.    Thank You.

- Bill Pritchard

Argentina creams US Markets / Aug 1 Update

Well, Argentina has successfully creamed US Markets, at least for one day, by defaulting on July 31 one minute past midnight.    This default was briefly touched on in my June 29 post on this site.   Interesting is that the Argentina default was not mentioned much in the “other” sites (to include Marketwatch, Motley Fool, etc.) until now.   My June 29 post discussed my feeling that our markets will recover from this, which I still believe, but the fact remains that our markets have taken numerous hits over the last few weeks, and one is left to wonder when (and from where…) the knock-out punch will finally occur.   The fact that the markets are still hanging on, is a reflection in my opinion that a recovery is not impossible.  I don’t think anyone will argue the statement that the world is in challenging times right now.   

The Dow Jones Index closed down 317 points, with both the Dow and SP 500 Indexes down for the month of July (July is now over).   In my July 18 post I discussed some challenges facing the markets, and how the YTD returns for the TSP Funds have been lackluster.   This assumes you were in the funds since January 1, your returns have been 6% to 7%.    Now we have an additional challenge:  Argentina in default.    The various financial sites are linking today’s market sell-off due to multiple reasons (most sites have journalists behind them, not traders or folks with skin in the game).   However, I purposely stayed up July 30 night from 10PM, 11PM, thru midnight, 1AM, 2AM, and literally watched the SP 500 Futures (which trade at night) rollover and go downhill in-sync with the approaching default, and past midnight, the default.   Of course I was cringing on July 31 morning when Wall Street opened.   

Now before we panic over Argentina, let me make some observations, listed below, about why I believe (aka “opinion”) that this is not something to panic over.    Observe that I like Argentina as a tourist and have been to Buenos Aires and really enjoyed it.  But, this is not about tourism. 

Some Reasons the markets should not panic over Argentina

1.   Argentina is not a player on the world economic or financial arena.   China, England, Russia, Saudi Arabia, Japan, USA, are.   If a country, via governmental policy or political actions, can cause financial harm to the United States, then they are a player.   If not, they are not.   This is my definition, not your typical definition Money Magazine definition.

2.  Argentina produces no critical/crucial, products for the United States consumer (wine is not one of them), in which product price-change or currency rates may impact the United States.   Argentina does not produce or source products for Wal-Mart’s zillion stores (China does), it does not produce crude oil, and it’s banks are not safe-havens (far from it) for money or locations of investment.   Asia and Europe, are (amongst others).

3.  No critical thinking, ground breaking thought or ideas, are coming from Argentina or any of Latin America for that matter.   Japan brought us the Sony Walkman and the Honda Civic, England brings us a military and intelligence ally, and China brings us the ability to manufacture a zillion widgets for one dollar, keeping the price cheap for the consumer while allowing profits for the corporation.  Korea builds the Samsung phone.  If any of the above face a default, this could impact our country.   Argentina ?  

4.   Argentina does not have a huge labor force used (via outsourcing) by US manufacturers.   Such a labor force needs to be paid (currency rates), fed (food availability), retained (Company A offers better package than Company B), etc.  Mexico does (Ford builds cars in Hermosillo).   China, obviously, does (ask Wal-Mart).   India does (call Citibank customer service, your call is answered in India).   Argentina ?

So as you can guess by now, I don’t think (again, opinion…) that we should panic over Argentina.   As I have touched on in prior posts, the markets REACT to things (another reason we, the investor, should REACT to the market, versus try to predict something that spends its entire existence itself reacting to other stuff).   Panic and Greed are common reactions expressed by the market.    As most of us know, in a panic situation (think “Fire” in a movie theatre), the masses flee out the doors without looking back at the progress of the fire or verifying if a fire indeed exists.  It is everyman for himself.   If a bunch of people are swimming at the beach and someone yells “Shark”, nobody is sticking around to verify that indeed a shark, and not another type of fish, is swimming in the area.  The markets, composed of people, are no different.

With the “you are starting to ramble” warning light illuminated, let me move forward to some charts.   My opinions about Argentina aside, the market is indeed displaying weakness and has had numerous days of “Distribution” in recent weeks.   This in almost all cases will send an index into a new downtrend.

1930 is our new support level to watch for the SP 500, which was hit today and represents that the index has been placed on re-wind back to June 15.   All gains from June 15 to present have been erased.

SP 500 07.31.14 thumb Argentina creams US Markets / Aug 1 Update

SP 500 07.31.14 comments thumb1 Argentina creams US Markets / Aug 1 Update

With July 31 daytime trading now over, I am pleased to see that the SP 500 Futures (evening July 31) have recovered (slightly).    This does not mean the bottom cannot fall out, but lets keep our fingers crossed.

SP 500 FUTURES 07.31.14 thumb1 Argentina creams US Markets / Aug 1 Update

SP 500 FUTURES 07.31.14 comments thumb Argentina creams US Markets / Aug 1 Update

As can be seen above, the evening SP 500 futures session may have “come to its senses”, with trading action having not gone below the July-31 day session.

In final testimony to my “we should not panic” argument, is Gold, the default “panic currency” which basically did nothing in response to Argentina.   In theory, it should go up, as people panic because the world is about to end.   Gold did nothing.    See chart:

GOLD 07 31 14 thumb Argentina creams US Markets / Aug 1 Update

GOLD 07 31 14 comments thumb Argentina creams US Markets / Aug 1 Update

In summary, I am “monitoring the situation” and as discussed, the market indeed is showing signs of weakness.   I remain 50% S-Fund and 50% C-fund however this can change at any time.   Also, we need to watch the 1930 level on the SP 500 as any action below that is undesired.

I apologize for the long post, but a 300 point loss on the Dow Jones is not exactly “short story” material.   I wanted to put forth my perspectives and opinion on what is going on.  

NOTE:  Fridays are typically bad days in general for the markets, as people tend to unload holdings prior to the weekend, in case the world ends over the weekend.    Friday August 1 may be a down day, but this in and of itself may not be “additional bad news” it may be typical Friday behavior.   The volume on the index will assist us in determining what is going on.

As always, please share this site with your friends and colleagues.

Talk to everybody soon and thanks for reading….

- Bill Pritchard

* This August 1 update released on July 31 / 11:15 PM CDT

July 18 Update / My TSP Allocation: 50% S and 50% C-Fund

Hello Folks

Well as we now know, Malaysia Airlines lost a B-777 airliner over Ukraine yesterday July 17, which was clearly a tragic event, with early reports indicating a surface to air missile being the cause.  It is my opinion, that this reflects the difference between trained, professional, soldiers, in an organized military force of a flag-bearing nation (even if “enemy”), versus caveman-savage rebels/terrorists with varsity level equipment at their disposal (Surface to Air missiles).   This is a TSP site, not a political one, so I will stop there.  I commented on a previous IL-76 cargo plane shoot-down in my June 16 post, regarding unarmed cargo planes being shot down.   One month (almost to the day) later, a commercial, civilian, airliner is shot down.

Not surprisingly, the market sold off hard the same day, and as I have commented before, almost all market behavior is psychological in nature and the result of humans acting out of fear, greed, and (at times) optimism.

I, like all of you, was taken aback by the market sell-off but I have chosen to remain invested in stocks and the TSP stock funds.    Since we cannot predict “Black Swan” events such as the above (or anything else for that matter- many talking heads on cable TV news claim however that they can predict stuff….), I choose to respond to the market itself.   In most cases, past behavior is reflective of future behavior.    It should be noted that the next day, July 18, the markets rallied, with the Dow Jones index closing up 123 points.   

The SP 500 index has had multiple days of selling, on above average volume, also called “distribution”, in recent weeks.  This is not healthy for any uptrend, and multiple days of selling can stall and reverse the uptrend into a downtrend and into a new bear market.  This activity requires that we keep our trigger fingers close to the G-Fund trigger guard.    It should be also noted that the S-Fund (small cap stocks) have taken a drastic turn to the south, largely due to the BioTech sector taking a beating in the press.   The leading fund is currently the C-Fund.

Historically, when a bull market “tops out” (reaches the highest point it can go, then goes flat, then starts into a bear market), large cap stocks (such as the C-Fund holdings) are the last ones to fall, and are outperforming everyone else.   This is because the “big money” investors (hedge funds, mutual funds, retirement plans aka TSP) typically gravitate towards larger stocks and perceived blue chip “stable” companies.   It is easier (and your customers won’t be asking questions) to invest $50 Billion into Microsoft or Boeing stock than it is into smaller company stock such as a Biotech with a pending FDA approval or a company selling solar panels for your house.   However, this very behavior (large cap stocks outperforming all others) can be used to identify turning points in the market, and shifts in sentiment.

It should be noted that in the early stages of a new Bull market, people are excited, and motivated, and tend to invest in the riskier, “next big thing” companies, which are in almost all cases small-cap stocks.  Therefore, when you see small cap stocks start to outperform large caps, and you have additional indications (volume, index price performance) that a market trend change is occurring, you can often get into position for a new Bull market way ahead of everyone else, usually with profitable results.

Lets cut to the chase, I am moving my TSP Allocation to 50% S-Fund and 50% C-Fund.   I am not going fully 100% C-Fund because I think (my opinion) that the small caps have taken some underserved hits over the last 30 days and I anticipate some health returning to that category.   I could be mistaken, but these are not “normal times” and I can’t remember in over 20 years of active trading experience, markets facing so many issues at the same time.   We have crude oil and middle east problems, and serious problems with Iraq violence.   We have a possible American exit from Afghanistan, a source country of terrorism.   We are sanctioning Russia, a country we “need” to serve as referee when other countries will not listen to us.  Many emerging market nations, as if the above issues are not enough to swallow, have ongoing debt and fiscal issues (Portugal, Argentina, etc) which can have a viral affect into world markets.

YTD returns (we are now into the second half of the year, July 2014) reflect a 7% return on the C-Fund and 6% return on the S-Fund.   While this is better than nothing, it is not that great either.   And our TSP row-boat has had to ride thru a lot of storms and waves on the way to any gains.   This is why I advocate the G-Fund in times of market turbulence.    Yes, it is hard to quantify or establish data to “justify” going to the G-Fund, especially when the market resumes up a week or two later.   However electing to not use the G-Fund as a tool in our tool box would be like electing to not pay home owners insurance, because “I have never had a fire in 20 years.”   The “past data” of no fire history reflects that you probably will not have a fire next year either.   But what if you do ?   Can you recover from that ?   Do you want to try ?  Roll the dice ?   G-Fund is akin to insurance, it is safe-haven in times of market problems and turbulence.   Yes, exiting to G-Fund affects overall percentage gains.   However it is a trade-off for peace of mind (at least for me) versus enduring elevated risk in times of market turmoil.

In summary, I am 50% S-Fund and 50% C-Fund as of now.   Due to the various international problems, I am refraining from investing in I-Fund at the present time.  We need to keep an eye on things, as the current bull market may be topping out, with a new bear market possible in the months ahead.   At the end of the day, nobody can predict or crystal ball things, and we must react to the market itself.

Thanks for reading and talk to you soon.   Please continue to share my site with friends and colleagues.  Have a great weekend everybody…..

Bill Pritchard

 

June 29 Update / TSP Allocation 100% S-Fund

Hello Everybody

This update will be brief, many of you are out next week due to the July 4th holiday…by the time you come back and check your emails, this will be buried at the bottom of the inbox.   With that said:

I remain 100% S-Fund, as that fund, representing small-cap stocks, reflects the top performer currently.   Second runner-up is the C-Fund, representing large-cap stocks and the SP 500 Index.   Folks who are 50%/50% S and C-Fund have a fine allocation, nothing wrong with that.

At the present time, I see no “red flags” or “warning signs” by any of my proprietary indicators to indicate problems ahead.

Iraq tensions remain, however open-source media seems to paint a stabilizing picture in the region.   Time will tell, however crude oil prices have come down somewhat, to $105 a barrel, off their Iraq-panic highs of $107.   If we could get crude below $105 and even miraculously to $103, that would be great.  Ukraine/Russia continues to be an issue, although I have lost track on what “cease fire” or “agreement to pull troops back” we are on now and quite frankly have grown bored with that situation.

I-Fund lags all the other funds, not a surprise due to its international nature and various international markets suffering due to perceived risks and problems.   One interesting development is a deadline of June 30 for Argentina to pay back $1.3B worth of debt it owes to bondholders.   If that date passes, they have an additional 30 days (the way I understand it) to reach a solution (probably August 1) with bondholders or the various credit ratings will consider Argentina in “default” status and downgrade its credit worthiness rating.   This will likely kill Argentina stock markets and may affect ours, temporarily.   Based on my research, most large USA investors in Argentina have bailed out by now, as Argentina is a “we heard this song before” situation.   In the end, speculating how it will affect US markets is playing crystal-ball, and mine never seems to work.   The financial media has not (not really) talked about this story extensively, but I expect it to pick up some traction in mid-July.

Note that the US markets close on July 3 at 1PM Eastern Time, and are closed entirely July 4.   Expect low volumes this week, and any “down moves” are really nothing to loose sleep over, unless on huge volume.   Most market players will be out of the action by Tuesday afternoon, as they (or their drivers) drive east to the Hamptons for the long weekend.

I promised to keep this update short, I get to typing and tend to ramble, my apologies.  

Please continue to share this site with your friends and coworkers, the “stickiest” marketing is word of mouth referrals, from you, to the next guy.   This site has grown tremendously in a short time, and this is largely a result of your referrals.   Thank You and if you believe this site continues to add value to your financial situation and enhance your knowledge of the TSP and markets, please share it with the next person.    I have chosen to not get too wrapped up with pumping out Twitter feeds, Facebook, Google+, etc. etc., and instead focus on delivering a quality, simple to understand, product, to you.  That formula seems to work.  Ultimately, this is your site, designed to benefit you, the TSP participant and other market investors who desire to improve their knowledge and performance.

My TSP Allocation remains 100% S-Fund.

Everybody have a great July 4 holiday !   

- Bill Pritchard

June 16 Update–Markets rattled by Mid-East problems

Ok, drum roll…..can anyone guess what is rattling US Markets ?   Who would have guessed ?   Middle East problems and instability. 

First, my TSP Allocation remains 100% S-Fund.   Many subscribers will read that and stop there, and that is cool.  For those who desire some additional opinion-based analysis, continue reading.

On June 12, the SP 500 index closed down, on increased volume, which is something not desired, then recovered (somewhat) on Friday June 13 and Monday June 16.  The June 12 action was a direct result of the issues in Iraq, in which terrorists/insurgents associated to the ISIS Group took over key Iraq cities and executed hundreds if not thousands.   Also, Ukraine/Russia is still hot, in light of numerous Russian President Putin (does anybody really believe this ex-KGB guy) statements that he is withdrawing from the region and/or is seeking peaceful options.   Pro-Russian rebels just shot down an unarmed, Ukrainian IL-76 cargo plane, while it was inside Ukrainian airspace and territory.   I suppose “in war”, anything can be targeted, but an unarmed cargo plane, legally and rightfully in position in their own country, just got blasted out of the sky, and at least in my opinion, it seems things are escalating, versus not, in Ukraine.

Most everyone has Fox News / CNN / etc., so I will not regurgitate what is already reported.    I have posted on this site numerous posts in testimony to the market’s desire for stability (no matter what the topic:  war, jobs, earnings) and the market’s desire for “knowns” versus “unknowns.”  The markets, ultimately driven by people (traders, investors, etc.), are extremely sensitive to instability and unknowns.

When (sadly) thousands of US-trained/US-invested troops/forces in Iraq basically give up positions and flee hostile, invading forces (ISIL), this obviously was not received well by the markets.  Iraq, an OPEC member, is a huge producer of crude oil and since the US-pull out, is a sensitive region and potential “breeding ground” for bad guys.  

In classic “we may go to war” action, Crude Oil has jumped, Gold has jumped, and stocks have gone down.   NOTE:   Historically, in almost every case, once military action occurs or some sort of political/diplomatic solution is successfully implemented, the markets rally.   See my prior posts on this topic, some of which are at:

http://www.thefedtrader.com/april-4-2013-update-precautionary-move-to-g-fund-is-war-good-for-the-markets/

http://www.thefedtrader.com/aug-27-update-war-markets-action-look/

Lets take a look at a chart of the SP-500 Index:

SP 500 06.16.14 comments thumb June 16 Update–Markets rattled by Mid East problems

As can be seen above, the index has somewhat found stability and attempted to resume its uptrend.

Charts of Crude Oil and Gold are below, with comments on the charts themselves.   I prefer this as FYI only, we can’t trade Crude Oil or Gold in the TSP.  

CRUDE OIL 06.16.14 comments thumb June 16 Update–Markets rattled by Mid East problems

GOLD 06.16.14 comments thumb June 16 Update–Markets rattled by Mid East problems

It should be noted that while all the indexes have gone lower, the best performer remains the S-Fund.   The I-Fund (not surprisingly) has taken the worst hit over the last few days.  

In other news, the International Monetary Fund (IMF) has reduced its “growth forecast” of the US Economy, in this article.  While this is not necessarily good news, it may serve as ammunition for the anti-interest rate hike crowd and possibly suppress any rate hike date-acceleration (moving the planned date to a sooner date) that may be planned by FOMC.   Or maybe not.    Depending on how US elections go and the mood of our politicians, in light of other issues we are dealing with, how much we listen to IMF, headed by a French lawyer, is to be seen.

In summary, we are currently in some “Exciting Times” right now.   My TSP Allocation remains 100% S-Fund.   Any changes to this or other significant news, I will post it to this site.

Thanks for reading and please share this site with your friends and co-workers.

- Bill Pritchard

June 6 Update / TSP Allocation 100% S-Fund

Howdy Folks

Today the jobs report was released and the markets responded very well, closing up, considering the report as very positive, and also giving us an indication that the planned upcoming rate increases will not be accelerated, as unemployment remained steady at 6.3%.

I am now comfortable with returning to stock funds, and will be going 100% S-Fund at the present time.    The small cap stocks responded strongest to the jobs report, and it stands to reason that this category stay strong.  Also, over the last two weeks, the small caps stocks have outperformed other categories.

I have no cool charts to post this time around, but the most important thing is that I am returning to the S-Fund.

Former PIMCO CEO Mohamed El-Erian provided his view of the jobs report, which I believe is worth watching.   Video courtesy of Bloomberg.

 

Thanks for reading and if you find this free site informative, beneficial, or maybe just entertaining, please share it with your friends and co-workers.

Everybody have a great weekend !

- Bill Pritchard

June 5 2014 Update (brief)

Hello folks

Today June 5, 2014, was the first day that the indexes flashed the upward “oompth” and thrust that I had been waiting for.

Tomorrow, June 6, is the release of the “jobs report”….jobs are very important for economic stability, home purchasing, consumer spending, and is an indicator of how our economy is doing.   Ideally, the markets respond positively.

I am not taking any action until we clear the jobs report.   Some of my loyal readers have reminded me that the indexes have hit new highs and why are we in G-Fund.   Yes, correct, and many of the readers are really developing an eye for things.   However without volume to support new highs, things can collapse suddenly.

Today, we saw much improved volumes on the indexes, with upward price action.  That is finally what we have needed to see.   The prior weeks of hum-drum, lackluster, price drifting upward (movement which indeed triggered “new highs” but more things needed to be considered), on low volume, witnessed a clear behavior change today.

The past two weeks have seen the small cap stocks (S-Fund) outperform other stocks, so that will likely be the place to move, pending tomorrow’s market action.

Thanks for the great emails and me personally, (yes a little risk averse), I am waiting until the market digests the jobs report.   A “good report” can go both ways, the market may digest this as good news, that the economy is doing well, however the market may say “hey, rate increases are that much more of a reality, and they may occur sooner” and the markets go down.   So as we have seen in the past, “good news” can cause many market reactions.

Our job is not to crystal-ball things, but REACT to the trends and market behavior.

I am 100% G-Fund, hopefully not much longer.

Thanks for reading !

- Bill Pritchard

May 25 Update / TSP Allocation remains 100% G-Fund

Hello everybody

The markets continue to behave in a frustrating manner.  While new highs have been attained, we have not seen any volume that would serve as combustion for a solid new uptrend, ideally launching the markets out of the recent quagmire going back basically two months.

The new high made on May 13, was a “one day flash in the pan” which then collapsed lower the next day, largely due to a lack of volume to sustain things.   The high made on May 23, may or may not repeat the same behavior, as it too, was attained on low volume.

What we are looking for is the following criteria before any confidence can begin regarding a new uptrend.   The following criteria have been established by Investor’s Business Daily, of which I follow closely, albeit I have tweaked some of their strategies to accommodate my personal TSP and stock portfolios.

We need to see:

1.  +1.7% Gain or better on the SP 500 or NASDAQ index (after the market closes for the day)

2.  On volume ABOVE/HIGHER than the prior session volume.

3.  Volume for the day should be ABOVE AVERAGE, ideally 25% or more.

IF all three are met, this is STILL NOT a green light to dive immediately back into stocks/stock funds.  It is an “almost, darn-close, green light”, requiring us to monitor things for additional signals.

My earlier statements regarding support and resistance still stand, however, “one-day penetrations” of prior levels are not really reasons to raise the level or to suddenly delete the yellow caution flag.   In other words, a few weeks ago, I spoke of 1885 as being overhead support.   Well, as luck would have it, this was penetrated for a day or two, only for the trend to reverse back down.   Note that almost all recent penetrations have been on low volume.   As stated numerous times before on this site, volume is the “credibility” behind the move.   Low volume = low credibility.   High volume = good credibility (that the move will continue).

Lets take a look at a chart of the SP 500:

SP 500 3 MONTH thumb May 25 Update / TSP Allocation remains 100% G Fund

SP 500 3 MONTH comments2 thumb May 25 Update / TSP Allocation remains 100% G Fund

SP 500 3 MONTH comments thumb May 25 Update / TSP Allocation remains 100% G Fund

This indeed is challenging and frustrating.   It should be noted that it takes volume to prop up, and sustain, new uptrends and bull markets.   It does NOT take volume to prevent a market from collapsing under its own weight or otherwise falling apart.    So in the current market climate, I remain 100% G-Fund.   Yes, “we made new highs” this month, and if anybody wants to jump back in, it is me.   However I think it is a very risky proposition without the volume to validate the recent moves up.

With that said, for entertainment value, I have posted a 2011 video of a Mark Cuban interview (TV show Shark Tank, supporter of Iraq War Veterans).   Video is courtesy of YouTube and Wall Street Journal.     Mark Cuban is no stranger to “speaking his mind” and making his stance known, whether it be the NBA or tech investing.   In this video, he discusses his opinion that Buy and Hold is a Crock of S**t (time stamp 1:07) and his thoughts on being “in cash.”  

That’s all I have for now.   Again, my TSP Allocation remains 100% G-Fund.  Thanks for reading and please share with your friends and colleagues.

- Bill Pritchard

May 12 2014 Update / Markets stage Rally this date

Hello Everybody

Today, May 12 2014, the markets staged a rally, with the NASDAQ (a tech heavy index, as discussed in prior posts), performing best, with a 1.77% gain over the previous session close which was May 9.   The other indexes, the SP 500 and Dow Jones, preferably would have returned a similar performance, however they returned 0.97% and 0.68%.   Again, the NASDAQ is tech heavy, while the SP 500 is more of a broad based index.  Financial press reporting reflects that GOOG (Google) and AAPL (Apple) stock helped lift the NASDAQ higher today.   Whether GOOG and AAPL represent the entire universe or the entire US economy is yet to be seen, hence my dependence on the SP 500 versus the NASDAQ as a market barometer.

It should be noted that a gain of 1.7% or higher, in the NASDAQ or SP 500, on higher volume than the previous trading session, qualifies as a Follow Thru Day (FTD), per the authors of Investors Business Daily.   Since we don’t have the volume criteria met, today did not qualify as an FTD Day.   Lets take a look at a chart of the SP 500:

SP500 05 12 2014 thumb May 12 2014 Update / Markets stage Rally this date

SP500 05 12 2014 COMMENTS thumb May 12 2014 Update / Markets stage Rally this date

As such, I hate to say it, but “we have seen this show before.”   The markets rally on reduced volume, everybody celebrates and high-fives each other, then they crash a few days later.   Can we trickle ourselves into a new uptrend ?   A little each day on low volume ?   Well I suppose anything is possible however historical studies have shown that all credible uptrends are ignited with strong volume (which we still do not have).  Without volume to support the foundation of the house, the house may be a house of cards, liable to fall apart and crash on the hapless occupant.

With that said, my TSP Allocation remains 100% G-Fund.  Let there be no doubt, today was a welcome performance and change in behavior from the lethargic back and forth action seen over recent weeks. Now the question remains if this is a short lived event, or the start of a new uptrend.   If the latter, I will move my TSP Allocation accordingly.   Until then, I remain G-Fund.  Nobody is ready to get out of G-Fund more than I am, believe me.   I don’t like “hanging out” in G-Fund anymore than the next guy.   Lets cross our fingers and see how the rest of the week shakes out.

Thanks for reading and talk to everyone soon…

- Bill Pritchard

Week in Review / May 3 2014 Update

Hello everybody

Well, the previous week brought no real progress to things, market-wise.   The SP 500 indeed broke thru 1880 and touched 1891.33, on Friday May 2, in response to the “Jobs Report” released on the same date at 8:30 AM Eastern Time.

This is above my previously discussed “overhead resistance level” of 1880.   However a little more is going on behind the scenes, so lets talk about it.   Lets take a look at the one-day chart of the SP 500 for May 2, below, one without comments, then one with comments, before we start our assessment of May 2.   It should be noted that the mainstream media is putting out that the SP 500 and Dow Jones have hit record highs, which is technically correct…what they fail to tell you is that the highs were hit at 10:30 AM Eastern time and that the indexes went lower the rest of the day.  The markets open at 9:30 AM, so the indexes only lasted one hour before rolling over.  So, no, people are not diving back into the markets with both feet, and sending stocks higher.  Lets look at some charts:

SP500 05 02 2014 b thumb Week in Review / May 3 2014 Update

SP500 05 02 2014 b COMMENTS thumb Week in Review / May 3 2014 Update

What apparently happened, is that the worry, tension, and concern over the jobs report, was digested as “good news” initially, but then folks decided the news was not really so good as believed.  The financial press, largely read by Wall Street, were quick to criticize the report, with most editorials all stating the strong assertion (multiple, different publications) that people have simply stopped looking for jobs and/or are retired-out of the workplace, thus affecting the data in the report.

Not saying one person over another is “right” or “wrong”, 288K jobs created is better than no jobs created, but in any event, opinion/right/wrong/theory/etc. do not matter, what matters is how the market itself acts and responds.  Unfortunately, the jobs report euphoria lasted about one hour and the indexes rolled over and closed lower by the end of the day.  (But remember the headlines, “Indexes make new highs” etc. etc.)…

Important to note is that the current unemployment rate is 6.3%, which is below the 6.5% threshold level believed by many to be the “green light” that the FOMC needs to raise the Federal Funds Rate.   Furthermore, “rate hikes” are not welcomed with open arms by Wall Street, and this will cause additional indigestion for the markets.  Many speculate the next rate hike will occur in Summer/Fall 2015.

Lets go back to the week itself (the title of this update is Week in Review….), before we start the discussion, here are two SP 500 Index charts, one with no comments, one with comments:

SP500 05 03 14 thumb Week in Review / May 3 2014 Update

SP500 05 03 14 COMMENTS thumb Week in Review / May 3 2014 Update

What is apparent from looking at the charts is that little volume is occurring in the indexes and we are seeing little serious upward movement, aka yardage-gained.   Yes, as discussed above, we hit 1891 on Friday but now we all see that there is “more to the story.” 

It should be noted that on April 24 and 30, slightly above average volume occurred on the SP 500, with a slight upward movement, and on April 28, above average volume occurred, with minimal upward movement.   This is associated to a behavior known as “Stalling” or “Churning”, discussed further by Investors Business Daily (the folks who pioneered the concept) at this link.   In short, stalling is when the index fails to make any decent upward progress, even though it may have some volume activity which could serve to send it upward.   When this happens, it is akin to a crowded shopping mall, except in this case, the “shoppers” are not buying nor selling, they are just walking around browsing.   The un-informed observer (mainstream media) would report “the mall parking lot is packed with cars, and people are filling the stores, therefore the stores must be selling a lot of merchandise.”  Except, they are not.   

Maybe that example does not make sense but that is my best attempt to explain stalling in the indexes.   We have some volume, just no resulting action.   It should be noted that many professionals consider a “stalling day” as unhealthy as a “sell off day”.    AGENTS NOTE (yes I said that LOL):   The “above average” volume April 24 and April 30 was nothing earth shattering anyway….

NOTE:  On May 1, 2014, Investors Business Daily newspaper went ahead and affirmed that stalling was indeed occurring on the NASDAQ index.  The SP 500 was not mentioned.

With that said, I remain 100% G-Fund.   In the current climate, I don’t look at things as “missing opportunities”, as the indexes have not really done anything except flop around.  If I miss a sudden, violent, sell-off, or worse, the start of a new bear trend, something not impossible right now, then great.   Missed opportunities ?   Right now, based on my optic, there is no opportunity to be had, and nothing missed.

I remain 100% G-Fund.

Thanks for reading !    Talk to everyone soon…