Markets go down on Disagreement

 

Hello Folks

Well, it is about that time- Update Time, numerous folks have emailed me, WhatsApp’ed me, or just found me, and asked if the world is ending and why the market is going down.  Some of the concerns are valid, others are reflective of an “always goes up” market which quite frankly has lulled some of us into a comfort zone.   In this post I will attempt to explain what I believe is happening, and where I believe we are headed, at least near-term.    First, well not first but before I go further, my TSP Allocation and Contributions of  50 percent C-Fund, 50 percent I-Fund remains unchanged.

The markets right now are policy-driven, not economics driven-  I have said this numerous times on this site, and sadly I am being proven correct as we watch the markets decline.   Policy-driven, but more correctly, politics-driven.

Below are charts of the SP 500 Index, my standard barometer to determine market health:

Apparent in the above charts is that the markets were on a fairly intact uptrend prior to Nov-9.   Then what happened ?  Did a report come out indicating that personal bankruptcies are at all time highs ?   Huge unemployment numbers ?  Poor retail sales data ?  GDP data worsening ?   None of the above.  What happened, and is happening, is a lack of agreement in Congress.

On November 9, the Senate Finance Committee stated that the Tax Reform Plan would cut corporate tax rate to 20% no earlier than 2019, versus 2018, as originally believed.   The markets sold off on that news, which served as a reminder that “everything is not as it seems” and that agreement in Congress is clearly lacking.

On November 14, Senate Majority Leader Mitch McConnell announced that a revised tax plan is being proposed, a plan that includes a partial repeal of Obamacare.   If you want about a thousand search results on this topic, feel free to use Google and you will not be disappointed:  numerous theories exist as to what impact a repeal will have to the economy.  I will not attempt to dissect the approximate 1,000 opinions on the internet.   But I will state the obvious:  Yet again, we see discord in Congress.

A review of the charts above will reveal that sell-off volume is not super high, indeed some days it was above average, but we are not talking 50% or greater (150% normal) than average volume.  The SP 500 is still above its 50-day Moving Average, a useful trend identification tool.   Will the month close out with the index, and various TSP funds, in the negative ?   Yes, this is possible.

Should we worry ?   I am not worried, not yet.  A glance at the Gold Futures (Gold is historically a safe-haven investment for investment doomsayers) indicates that nobody is bailing out of stocks and into Gold.   Gold prices are mostly flat (sideways) since mid-October.   See chart:

My frequently broken crystal-ball predicts that our politicians will realize that lack of agreement is impacting both Wall Street and Main Street, and that an 80 percent solution is the best answer.   “I win, you lose” is a binary model that should go the way of the Cold War.   This approach needs to be abandoned in favor of  “You win [some] and I win [some] – everyone wins”.   My opinion.

Thanks for reading….

-Bill Pritchard

 

 

 

 

October closes out / historically positive phase Begins

 

Hello Folks

In true “no news is good news fashion”, I simply had no bad news to write about, or “warning signs” observed this month so far – this is my second October post, albeit at the end of the month.  As such, it will serve as my opinion based analysis on what happened, and what lies ahead.   Bottom Line Up Front:  My TSP Allocation and Contributions of  50% C-Fund, 50 % I-Fund remains unchanged, I will discuss that in a little while.

First, as reported by some of the Government Employee targeted websites out there (Federal News Radio, Government Executive, NARFE, etc):     The 2018 joint budget resolution was passed with no cuts to federal retirement, pay, or other benefits.

With that said, for deeper, more knowledgeable insight into the benefits related perspective and the respective proposed cuts, subscribe to retired FBI S/A and current CPA Dan Jamison’s FERS GUIDE.  A paid subscriber will get email access to Dan who will attempt to answer your questions.  Every couple of weeks Dan and I trade emails in regards to benefits and/or TSP, he is the expert in regards to retirement benefits knowledge.

As it stands, no cuts have occurred however we may see this topic rear its head again down the road.  My opinion is this “flare up” should serve as a gear/equipment check for the folks in the audience, take a look at your financial situation:  if you are eligible to retire now (or soon), then apply that risk-assessment we all do in our day jobs.  I don’t think anyone has the answer, but I think that “Already-Retired status” is more insulated from attempts to erode your benefits than not.

Moving forward,  and returning to the topic of this post, the markets performed very well in October.  My default, market health barometer, the SP 500 Index, made new highs, as did international stocks to include North Korea neighbors of South Korea KOSPI Index and the Japan Nikkei Index.  While the threats from North Korea are clearly a worrisome matter, the Asian markets have apparently discounted them and returned to regular programming-  the aforementioned Asia indexes are uptrending nicely.  See charts with comments:

     

Traveling back home, the US markets are doing very well.   Primary causal factor is the improving Gross Domestic Product (GDP).    GDP is important because it gives information about the size of the economy and how an economy is performing. The growth rate of real GDP is often used as an indicator of the general health of the economy. In broad terms, an increase in real GDP is interpreted as a sign that the economy is doing well.   Note that in July, FOMC Chairwoman Janet Yellen advised Congress that achieving 3% GDP would be difficult.  However recent GDP statistics from the Bureau of Economic Analysis indeed appear very positive, third quarter GDP of 3%, previous quarter of 3.1%.   See chart:

Remember, many believe (including me) that the markets are a leading indicator, in other words, they go up (and down), long before the general public understands why.  We saw this in the 2000 market crash, and the 2009 bull market, the market direction changed before most of the audience identified what was happening.  What does that mean for us ?  It means that the current uptrend may be indicative of a longer term bull cycle.  Indeed many have observed that “this never happened before” and believe that the current market is “ready for a pullback” but when in doubt, follow the market itself.   Let’s take a look at some SP 500 Charts:

As mentioned earlier, my TSP Allocation remains the same.   Varying my analysis from different look-back periods, 90 days, 30-days, to weekly, I find it difficult to make “performance tweaks” to my TSP-  all the funds are doing quite well.   Looking ahead, the following dates/events may be noteworthy in the coming weeks:

New pick for FOMC Chairperson:  Expected Oct-30 week

Ways and Means Chairman Kevin Brady introduces Tax Reform Bill:  Nov-1

POTUS Asia Tour:  Nov 3-14

Congress Thanksgiving Break:  Nov-18 to Nov-26

Note that it is my opinion that if the Tax Reform proposals pass, the stock markets will respond with enthusiasm.  Further note that historically, November thru April represents a historically positive phase/cycle, the markets are typically up every month during that time period.

Nothing further to report for now….please continue to share my website with your friends and colleagues, I find it quite rewarding that I am able to raise awareness and share my point of view in regards to the markets and the TSP in general.    Once again, go take a look at Dan Jamison’s site and make sure you subscribe to his newsletter.

Thanks for reading…..

-Bill Pritchard

 

 

 

 

 

 

Rare Positive September – Market uptrend Continues

 

Hello Everybody

My personal TSP Allocation remains 50% C-Fund and 50% I-Fund.

September, historically a “down month”, was indeed positive, with the last trading day resulting in an All Time High (ATH) attained by the SP 500 Index, reaching 2519.44

We have witnessed fairly decent accumulation since mid-September, likely the market’s positive response to President Trump’s tax and deregulation plans.  We are also witnessing an improvement of the global economy, which helps everybody.  The next event watched by the market is a possible change to the Federal Reserve Chairperson, reportedly this will be decided by the end of October, as President Trump is reportedly considering not to renew Chairwoman Janet Yellen.

While official TSP data is not in, we will likely see that the S-Fund was the top performer for the month, with the C-Fund and I-Fund lagging, however still positive.  My personal conviction that the ideal allocation of 50/50 C-Fund and I-fund may change, I will allow October to come and close out, and re-assess my allocation.  To be clear:  “All stock funds are doing great” and it is rather challenging to make performance tweaks to any combination of stock funds.     Note that the I-Fund is leading and C-Fund is next best performing, when considering both YTD and past 12-month performance.   Again, all stock funds are doing fine.   Observe that I am not in the G-Fund, as I see no warning signs ahead or speed-bumps in the road, and thus feel the protection of the G-Fund is not needed for my TSP right now.

Let’s take a look at some charts, both of the SP 500 Index and of the SPY Exchange Traded Fund (ETF), which is useful to monitor volume action.

Evident in the charts is the clear up-trend, again, a rare event in September, a historically negative month.   Also apparent is “more up days than down days” a rather Basic-101 analysis device however sometimes basic is better than not.

I sometimes get asked if I am concerned about the I-Fund being impacted by events in Asia.   This is a great question, but if we look at the South Korea KOSPI Index (“their SP 500”) and Japan’s Nikkei Index (the largest Asian stock market is in Tokyo, Japan…also the country whose airspace was penetrated by North Korea missiles…)-  their markets do not seem too worried.   Lets take a look:

No major downturns or sell-offs in those markets, both next door to North Korea.

As such, I remain in I-Fund and personally am not too worried about things in North Korea, as they relate to my TSP.

With that said, I have no other news to report….I am very pleased with the September performance and as stated above, my TSP remains the same.   I typically re-assess my allocation every 90-days, we are past that point now.   I prefer to let October come and close prior to making any changes, remember I look at things on a 60-90 day cycle (typically…not always…) versus fret over daily volatility.

Hope everyone is doing well…I will post another update when warranted, for now let’s step back and watch how October plays out.

Thanks for reading….

-Bill Pritchard

 

August thankfully coming to an End

 

Hello Folks

Bottom Line Up Front:  My current TSP remains 50% C-Fund and 50% I-Fund.

This month of August has been a painful one, with three major distribution days on the SP 500, indicating that institutional investors were selling shares and exiting positions.   The entire summer has been rather painful, additional distribution days are apparent on the chart of the SPY Exchange Traded Fund (ETF) which is a useful proxy for the SP 500 Index:

You may recall prior postings discussing distribution days:   Numerous days over the span of weeks can serve to end any uptrend which exists.  In simple terms, multiple distribution days can send the market lower.   We indeed have increased risk ahead that the market can go lower.   With that said, here is my reasoning behind my own TSP Allocation, and my logic as to why I am not changing anything.  At least not yet.

  1.  History tells us that summers suck.   “Summer Doldrums” is one term used.   The worst month, is ahead – historically it is September, once we clear September, we may resume an uptrend.  Or not.  With this data point, we should not panic yet:  summers are always difficult.  And summer is almost over.
  2. The US economy is strong.   People are employed, housing/real estate (in most markets) is tight, airline flights are jam-packed, and consumer spending is up.  Note:  Decaying and vacant big box stores and shopping malls are not an indicator.  Consumers are spending like never before, however fighting for a parking space and walking a mile in the sun, risking skin cancer, to the entrance of the mall, only to discover your pant size is out of stock (but “our store across town at Valley Springs Mall has them in stock”) is a thing of the past.   Spending continues – It is called Amazon.
  3. The world economy continues to improve.   At the recent World Central Bankers Meeting in Jackson Hole, Wyoming, which concluded on August 25, the lead economist for the International Monetary Fund (IMF) reports that the world is seeing a broad-based recovery.

With that said, could things go south ?  Sure, anything can happen.  Do I think things will go south ?   No, my opinion is that once we clear September, the markets will resume an upward trajectory.  One speed bump in the path however is the threatened government shutdown, threats which are tied to the Border Wall and the federal budget.  In sum, when the most senior management of world’s most powerful nation cannot agree on a path forward, this hurts our credibility and “brand”, it also costs money$24 Billion was the cost of the 2013 shutdown according to Standards and Poor’s, the same company which created the S&P 500 index.  Contrary to popular belief, shutdowns are never “good” and they are never healthy for an otherwise choppy stock market.

With that said, I am optimistic and remain in the aforementioned TSP funds.  While my personal returns have been less than desired in the I-Fund and C-Fund, I am electing to remain there, as my belief remains that if Congress and the Oval Office can get on the same page, those two funds will see the best returns.   Note that even with the poor summer performance, the markets remain at their 50-day Moving Average lines (a trend identification tool), and well above their 200-day Moving Average lines:

This behavior reflects that the trend of the market remains upward.

I get quite a few messages and questions regarding various magazine and newspaper (print or online versions…) articles that claim the market will crash any day, and that doom is around the corner.   There are even a few internet chat groups out there, dedicated to stock discussions, claiming the same.  The best defense to all the noise is studying the markets and learning how they work.

I invite you to read about the “Magazine Cover Theory” which claims that when a “hot topic” is appearing on magazine covers, then that fad or topic is about to be dead, or reverse course.   A link about this theory is here:  http://www.businessinsider.com/the-fascinating-theory-that-the-economist-magazine-covers-are-like-cabbies-offering-share-tips-2016-10

That is all for now….be safe out there and talk to you soon.

Thank you for reading

Bill Pritchard

 

 

 

 

Fraud Charges Against Former Brokers Targeting Federal Retirees

 

Good Evening

In the news is yet another alleged (innocent until proven guilty disclaimer applies…) case of fraud involving federal retirees.   In this recent (alleged) scheme, four Atlanta, GA brokers allegedly convinced federal retirees to roll their TSP accounts into annuities, which reportedly had very high fees and were reportedly represented as being “approved” by the TSP program itself.

SEC Press Release:  https://www.sec.gov/news/press-release/2017-135

SEC Complaint:  https://www.sec.gov/litigation/complaints/2017/comp-pr2017-135.pdf

For general heads-up and situational awareness, please be suspicious of the following things when investing your money, especially the “nest egg” called the TSP.  Red bold represents major warning signs.

  • High investment returns with little or no risk. Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. Be highly suspicious of any “guaranteed” investment opportunity.  “Too good to be true” rule applies.
  • Overly consistent returns.  As we know, markets go up, markets go down.  You can’t control the waves in the ocean.  Investment values tend to go up and down over time, especially those offering potentially high returns. Be suspect of an investment that continues to generate regular, positive returns regardless of overall market conditions.
  • Unregistered investments. Schemes typically involve investments that have not been registered with the SEC or with state regulators. Registration is important because it provides investors with access to key information about the company’s management, products, services, and finances.
  • Unlicensed sellers. Federal and state securities laws require investment professionals and their firms to be licensed or registered. Most schemes involve unlicensed individuals or unregistered firms.
  • Secretive and/or complex strategies Super complicated investment ?   Esoteric, complicated strategy ? Avoiding investments you do not understand, or for which you cannot get complete information, is a good rule of thumb.
  • Issues with paperwork. Do not accept excuses regarding why you cannot review information about an investment in writing. Also, account statement errors and inconsistencies may be signs that funds are not being invested as promised.
  • Difficulty receiving payments.   “Check is in the mail” rule.  “Your money is locked up right now and cannot be accessed” etc.  Be suspicious if you do not receive a payment or have difficulty cashing out your investment. Keep in mind that fraudulent investment promoters routinely encourage participants to “roll over” investments and sometimes promise returns offering even higher returns on the amount rolled over.

Additionally, be wary of investment advisors, financial planners, stock brokers, etc, who are overly eager to get their hands on your TSP balance.   Some valid reasons exist to roll a TSP over, but cheaper fees is not one of them, as the TSP is about the cheapest retirement “holding tank” that exists (TSP, 401k, IRA’s are basically containers for money, inside that container are your individual investments, be it Mutual Funds, Stocks, ETFs, etc.   Consider the TSP a holding tank, or container).    Check out your potential new advisor.  The following sites may be useful:

FINRA Broker Check:    https://brokercheck.finra.org/

SEC Advisor Check:  https://www.adviserinfo.sec.gov/

PACER US Court Records (need an account):  https://www.pacer.gov/

State Comptroller Database checks.   Is the financial advisor claiming to be a registered LLC ?   Database checks will reveal this.   If not located, I would be suspicious.    The State of Texas version is here:  https://mycpa.cpa.state.tx.us/coa/

Would I do all of the above if I was investing $500 in a new hot stock ?  Probably not.   Am I rolling over a $1M TSP balance, along with a $1M IRA balance, into something called the Unlimited Opportunities Fund ?    Operating out of a UPS Store mailbox ?    Managed by a guy who carries a prepaid Trac-Phone ?   Yes absolutely.     Be careful who you listen to, we have some great folks in the federal retirement “information space”, Tammy Flanagan, Dan Jamison are two of them, both vetted and trusted professionals.   If you can’t identify the person behind the investment, website, etc., I would proceed with caution.

Be safe out there folks.    Talk to you soon…

-Bill Pritchard

 

 

New All Time Highs on Strong Volume

 

Hello Folks

Bottom Line Up Front:  My personal TSP Allocation/Contributions:  50%/50% C-Fund and I-Fund.

I apologize for the “quiet period” with recent website inactivity, however I prefer not to report on things that do not bear reporting.  Indeed we are in the middle of the summer, a period of lethargic performance in the markets; there is just not much going on.  On July 7, the markets began to come to life again, with things really looking very nice last week and this week, July 25 and July 26 to be exact.   Lets get started with some charts:

:

Many of the readers have adapted my chart reading techniques-  they will recognize that the volume action in the SP 500 Index on July 25 and July 26 was indeed above average, with All Time Highs (ATH) attained both days.   This is a very positive sign, and if history is our guide, such behavior will be a harbinger of things ahead:  continued up-trending action into August.   This is important:  August is historically the worst month for the SP 500 and NASDAQ stocks.  A positive August will serve as an indicator that the remainder of 2017 will be very strong.

On July 26 the Federal Open Market Committee (FOMC) concluded its July meeting with no change to interest rates.  Note that the markets remain earnings and policy driven (attention on interest rates has weakened) however the markets appeared to embrace the lack of a rate hike and embrace the FOMC’s positive language in regards to the economy.   PDF Statement

Another event on July 26, was the failed “full” Obamacare Repeal Amendment.  Healthcare reform remains a top priority by elected officials, and soon talk of a “skinny repeal” was introduced, which was met by numerous Democrats stating that there was “no chance” a skinny repeal would become reality.   While this is not a political commentary blog, I feel this is important as indecision and disagreement by our politicians can impact our TSP.   I sincerely believe if everyone can get on the same page, the market rally will get even stronger, which will benefit the TSP.

Speaking of agreements (which also means compromises…), a potential government shutdown looms ahead if agreement can not be reached on the “Border Wall” funding situation.  This, too, can impact our TSP, as world stock markets may not be receptive to the idea of a shut down superpower government.   President Trump, along with members of the Freedom Caucus, are in support of a shutdown if the politicians cannot otherwise reach an agreement.

As stated above, my personal TSP Allocation is 50% C-Fund and 50% I-Fund.  ALL stock funds (C, I, S) are doing very well.  I believe we will see the I-Fund end up as the summer’s overall best performer, but again, all stock funds are doing well.

In regards to some questions concerning possible changes to our FERS retirement system, I have located a document from the NARFE, which discusses this topic:  NARFE Federal Benefits PDF

That is all I have for now, hope everyone is doing well…talk to you soon.

-Bill Pritchard

 

 

Summer Doldrums Begin

 

Hello Everybody

Bottom Line Up Front:   My TSP remains 50% C-Fund, 50% I-Fund.

It is apparent that the stock market “summer doldrums” are indeed upon us.  As most know, the month of June was mostly a sideways month, while many sectors witnessed gains, other suffered losses.  While the official TSP Funds monthly returns are not published yet, S-Fund will likely be the top performer.  All stocks funds are the place to be in, however determining which one will be next month’s top performer has lately been a game of throwing darts blindfolded.   As discussed or alluded to in my prior post(s), the current political climate in the world’s most powerful nation is impacting the markets, there is no question that 2017 is nothing like we have seen in past years, on a variety of fronts.

A few events in June have affected the markets.   On June 9, Apple Computer (a very large NASDAQ component) was downgraded, as analysts questioned its high stock price and wondered if consumers would dump the still-new IPhone 7 for the IPhone 8.  This impacted other tech stocks, and resulted in the NASDAQ taking a pretty good hit on June 9 and June 12.

On June 14, the Federal Open Market Committee (FOMC) decided to raise interest rates by 0.25%.   This was seen as a vote of confidence in the economy, and on June 19 the SP 500 Index attained an All Time High of 2453.82.  Unfortunately, Crude Oil has been crashing to the low-40’s- some may recall prior posts that Crude Oil needs to be $55-$60 to keep oil stocks up and keep workers off the unemployment lines.  Crude Oil, and related big energy company stocks (all large caps, aka C-Fund), subsequently did not do well in June.

On June 22, President Trump’s attempt at Obamacare repeal failed, with GOP senators unable to agree amongst themselves on the best path forward.  The recent inability in Washington to “close deals” has not gone unnoticed by Wall Street-  on June 27 and June 29, the markets sold off on high volume, not a positive sign.

Lets take a look at some charts:

The first chart above is a “close only price” chart of the SP 500 Index, it takes away the daily volatility (daily price swings) and only depicts the price when the market closed.   As you can see, the uptrend in the SP 500 is still intact.    The second chart shows the High-Low-Close (HLC) price action, and the third chart depicts the same thing but with attention to the new 2420.00 support level on the SP 500, and the recent trend of the index shown.

The action in June should not create panic or instill fear in your heart:  historically the NASDAQ has pulled back 10-12% each summer, typically this occurs between June 25 to August 25.  To be clear, each summer the lowest point of the markets typically are 10% to 12% from their previous highest highs.  If we take this historical behavior, using the NASDAQ’s recent high of 6341.70, the NASDAQ “summer bottom” should not go below 5580.70.   As such, I offer the following guidelines as we navigate the summer heat and summer doldrums:

-NASDAQ summer low not to exceed 5580.70

– SP 500 long-term support level remains 2400.00

If the markets go below these levels, it warrants “heightened monitoring” however don’t be in a rush to go to G-Fund in the summer.  The summer is typically lethargic and a great time to accumulate shares.  It is also hard to crystal-ball which funds will do best in the future, my personal allocation remains 50% C/50% I-Fund, due to my personal opinion that if, and when, the President and Congress can get onto the same page, this will be a great positive for the economies of our country and of other nations.  Our economy is doing great by all accounts, however if regulation is reduced in some industries and trade barriers removed, this will be a positive thing.

“What about my federal retirement benefits being taken away” – I hear this all the time, as stated before, I am pretty good at analysis of the stock markets, but my expertise dwindles beyond that.  For that please reach out to my colleague Dan Jamison of The FERS Guide

His email is:  fersguide@gmail.com

My opinion on this matter is that nothing is getting done in DC right now, and I don’t see our retirements being changed any time soon.  I could be wrong, but there are simply too many pending “projects” in Washington, all of them with minimal progress, so I am not sure if, or when, the proposed changes to our retirements will get closer to reality.   Note:  If I was retirement eligible now, and my personal financial situation could sustain it, I probably wouldn’t wait until the last-minute to “see what happens.”  I might be submitting my retirement paperwork now.   COLA removal, SRS Supplement elimination, High-5 instead of High-3, I have seen various worksheets floating around reporting $25-$45,000 in annual retirement income reductions if these changes indeed take effect.   The guy who has all the answers on these changes is Dan Jamison.

That concludes this update….thank you for reading and talk to you in a few weeks….

-Bill Pritchard

 

 

 

 

 

Weekend Update – Market Uptrend Resumes

Hello Folks

The last trading week of May is now behind us- allow me to discuss my TSP allocation & contribution changes, and my analysis of recent market action.  As we enter June, one must ask where did the year go, time sure flies when you are having fun.  June also happens to be part of the historical “summer doldrums”period of flat market action, which lasts from May through September:

Additionally, June represents “Month #6” of President Trump’s new administration.  Our new President is indeed setting new tones and taking actions not seen before.  As such, the market has not acted completely in line with prior historical “first six months” periods of past Presidents.  Using prior data and behavior is great;  I rely heavily on trends and “historical behavior” to temper my decision-making, however some of this has proven have lesser accuracy, likely due to the fact that President Trump and his advisors indeed are charting new courses and taking actions not witnessed before.  The S-Fund lagged in May, returning a negative performance, a rare event in an otherwise up market.  Such a laggard performance is a red flag for that category (small caps), it appears institutional money is indeed flowing to large caps (in this category exists Exxon, Caterpillar,  Boeing) and flowing to international stocks (I-Fund).   See graphic, from the official TSP website:

S-Fund still performed best on a 12-month period, however the last few months have impacted its YTD performance.  In finance and investing, it is said “don’t fall in love with your position” and my ties to the S-Fund are about to be severed.  My personal TSP Allocations and future contributions will be changing to 50% C-Fund, and 50% I-Fund.

Economic and political news over recent weeks has been largely positive, at least as far as I can tell, having stopped watching the two extreme leaning (both in different directions) news sources and instead obtaining my news from BBC, Bloomberg TV, and the Wall Street Journal.  While no media source will be completely unbiased, I encourage a look at the aforementioned sources if you are tired of the circus on the other channels.  The markets seem to have embraced President Trump’s first international trip, and the recent “Jobs Report” reflects the lowest unemployment level in 16 years, 4.3% in May.  A chart reflecting the unemployment rate is below:

The next major news event which may impact the markets will be the Federal Open Market Committee (FOMC) meeting, on June 13-14.  Indeed, the improving economy will give reason to discuss an interest rate hike.  However, as mentioned before, the market is policy and politics driven, and it is no longer about rate hikes.  However this topic will likely be discussed at the upcoming FOMC meeting.

Lets move forward with some “market talk” and discuss my favorite thing, charts and technical analysis.

On 06-02-17, the SP 500 closed at a new All Time High, attaining 2440.23, having broken the 2400 overhead resistance level on 05-23-17.

All Time Highs are indeed a positive thing.  The international stocks are also doing this, the ones we are concerned with occupy the MSCI EAFE (Europe, Australasia, Far East) Index.  An easy way to monitor this is to watch the Exchange Traded Fund (ETF) which mirrors this index:

As can be seen, a huge “gap up” occurred on 04-24-17, with strong volume and accumulation occurring since.   Gap Ups are further explained in my prior 2014 post here:  http://www.thefedtrader.com/01-15-14-update-sp-500-gaps-up/

I have received some inquiries as to “What changes are looming for my federal retirement.”   I am unable to answer them, all require fluency in federal benefits, accounting, and other such specialties, especially since a myriad of possibilities exist as to each employee’s personal situation.  I will however, provide you with additional information sources, as I too, am concerned about this topic.  The person who is an expert, is Dan Jamison, of the FERS Guide, I strongly recommend that you become a subscriber to his newsletter.

Below is a video from Federal Times, in which Jessica Klement from NARFE is interviewed on this very topic.

 

It is important to point out that none of the proposed retirement changes have taken effect yet.  I do expect some fireworks as we get closer to September 30, my crystal ball anticipates another government shutdown ahead.

That wraps up this update, hopefully I have shed some light on recent market action and articulated my reasons for my new TSP Allocation of 50% C-Fund, 50% I-Fund.   My subscriber-count continues to grow at a rapid pace, exceeding the population counts of some small cities.  All agencies are represented, civilian and military alike, to include financial advisors in private practice.   “Thank you” for sharing this with your friends and colleagues.

See you in a few weeks……

-Bill Pritchard

 

Dow down 372 Points as political concerns Grow

 

Greetings Everyone

As most know by now, trading on May 17 was pretty bloody, with the Dow Jones closing down 372 points.   No sector or industry group was spared, and NASDAQ stocks, an index which contains almost all small-caps (think S-Fund), was hit badly.   Allow me to share my views.

Bottom Line up Front, I remain 100% S-Fund but have been contemplating a move over to I-Fund and C-Fund.  As crazy as the world geopolitical climate has been, it is hard to argue with cold hard cash, and that is what the I-Fund has produced all year.   While some may believe that “it is too late to get in now”, in the investment world, when an index is doing very strongly, it behooves the investor to jump onto the train early, versus later.   As we approach June, six months since Mr. Trump was sworn in, the international stocks have reacted very positively.  There is no reason they cannot continue to do well.

Note that most sell-offs tend to be panic-driven, versus fact-driven, and as such, I avoid decision making with a lot of dust is in the air.  It is hard to see, and hard to navigate.    In aviation, it is taught that the first thing a Pilot should do after an engine failure or malfunction is “wind his watch.”  In summary, the Pilot should take a deep breath, look away from the litany of illuminated warning lights, and for a brief moment, do another task.

It appears confidence is waning due to what is happening in the political arena.   When in doubt, sell, and many on Wall Street appear to be doing just that.   Lets take a look at some charts:

As can be seen from the charts, the May 17 volume on the SP 500 Index was very high, consistent with institutional investors selling positions.

As I stated before, the markets are no longer about interest rates, and instead are about policy, and policy’s close cousin, politics.   Indeed, rate watchers have a date approaching, the FOMC Meeting on June 13-14 may shed some light on future rate hikes.   However rate hikes are no longer the main attraction in the current show (circus?) right now.

Now for some positive energy:   Dystopian views aside, the SP 500, while closing lower today on high volume, is still above a the lows of March and April.  The  new critical level to monitor is 2360.00, basically we need the index to quickly to back above that level, any contrary behavior gives cause for additional concern.   While I continue to consider a move to I-Fund, this recent turn of events may change my approach, which may include my first safe-haven move to G-Fund in a long time.

Until then, lets monitor things.   I remain 100% S-Fund and am contemplating an allocation change to include I-Fund and C-Fund in the near future.  I may move to G-Fund if conditions worsen.

Thank you for reading and talk to you soon…

-Bill Pritchard

 

 

Market’s Confidence Weakens

 

Good Morning Everyone

I hope this update finds everyone well.  I had intended to publish this on Thursday April 20 night, due to my celebratory mood triggered by the Dow Jones closing up 174 points that day.  However I said “self, as soon as you publish this, the market will go lower the next day [one of my subscribers, who I personally know, reminds me of this…Hello SJO…]” so I waited until the weekend.  The market indeed did go lower, obviously I had nothing to do with it, so maybe loyal follower SJO will be kindler and gentler with me in the future.

With that said, if anything can sum up the market, it is the fact that it is losing confidence in the current administration.  Observe that it celebrated things post-election, but the Paul Ryan failed AHCA really kicked it downward.  As a recap, on March 23, Paul Ryan’s Health Care reform (basically the repeal of Obamacare) was pulled after Ryan advised President Trump that it would not have the votes for passage.   The markets sold off very hard over the next few days, and this laid the ground work for April.

Lets take a look at some charts of the SP 500:

As can be seen, the 2017 peak in the market occurred on March 1, with the SP 500 attaining 2400.98.  It then drifted downward, and was pummeled after AHCA failed.   I say “failed” because it was never voted on, which is the same as “did not pass” – the markets have since become very skittish and have lost confidence in future administration policies and initiatives oft-mentioned during the elections.

News outlets are reporting that on Wednesday April 26, a “major announcement” on the new tax plan will be released.   This week also has a another event, the current Continuing Resolution (CR) expires on April 28.

As I said in numerous posts before, the market is policy driven, and no longer interest rate driven.  When was the last time anybody mentioned interest rates ?  Exactly my point.  Policy, or lack of, is driving events.   North Korea, Syria, and other hot-spots do not help matters.

Note that all of April has witnessed low to average volume, indicating that nobody is “getting back into” the market or jumping in with both feet.  You have probably three categories of participants right now: the 1) Scared/Non Believers, they are out now, 2) Believers and still in, but getting worried (me), and 3) Those who are out a long time ago or are in only partially, and waiting for the proper time to invest 100%, aka “waiting for the perfect time to enter” (out=not invested, in=yes in stocks and investments-  70% G-Fund and 30% C-Fund would be “partially in.”)  The levels to watch are 2335 as a support level on the SP 500, anything below that is a major red flag.  The overhead resistance level remains 2360.  We cannot begin to celebrate any trend reversal until the index can break upward through that level.

Interestingly, small cap stocks (S-Fund) have responded best on the few days the market has performed well.  Overall, my preliminary data reflects that small cap stocks have performed best (or, least-worse) in April.   If only we could get a trend change, and we would be good to go.

I remain 100% S-Fund until further advised.   Two big events this week, a reported “tax plan announcement” on April 26, and a CR Expiration on April 28.   I have no issue jumping to G-Fund but as stormy and cloud as the skies are, I am not quite there yet and remain 100% S-Fund.

I apologize if this post sounds like a political commentary-  I did not intend that.  However the markets are driven by policy, and its close brother, politics, right now…I felt it was worthy to share my opinion.

Thanks for reading, everybody have a great week.

-Bill Pritchard