Hello everyone
As we enter the month of May, one of the historically negative months for the Dow Jones Index (only 30 stocks, FYI…), history appears to be repeating itself, as all indexes have performed poorly. The questions then becomes “Is this time different [and a real bear market underway] ?” and “Or should I hang in there and not be concerned?” Before we proceed further, let’s insert a chart of the Dow Jones Index historical monthly performance, as published by the good team over at Stock Traders Almanac:
The May behavior gives some credence to the “Sell in May” strategy, discussed in FAQ #19, which was sent to me by a colleague in a sister agency. Note that (and this is what I said in my FAQ answer) I follow behavior of the market, and not automatic strategies, however I do find value in historical information and past behavior. With that said, in answer to the above questions, I am not overly concerned, but I am not over-joyed either by the market’s recent behavior. I am cognizant that (history is my guide) any chance for a positive gain in May is slim. So going into May, I already know that this month will not be great. Using the SP 500 (500 stocks, versus 30…) as my default index, we can see increased distribution on the index, which reflects selling by institutional investors. This selling began on April 28. Lets take a look at some charts:
The above are charts of the SP 500 Index. Below are charts of the SPY Exchange Traded Fund, which is a proxy to the index. The SPY ETF is useful for volume analysis. Let’s take a look below:
The breakdown is evident on the charts, which began on April 28. Major “follow on” selling is obvious on April 29.
While no single event can be associated to this, it arguably could be tied to campaign activity which is firming up, with numerous candidates dropping out. (and this means either party…Hillary becoming a front runner = bad/good, Donald Trump becoming a front runner = bad/good…if you have a crystal ball to accurately predict the upcoming election, please use it and buy both of us Power Ball tickets…). It could be numerous things, or…..could just be typical, historical, May behavior. The high volume above does have me a little worried though.
I am keeping an eye on the 2050 level on the SP 500, which appears to be a strong magnet for the index. Every time that it climbs above 2050, it gets sucked back to that level, causing headaches and frustrations for all. Friday May 6 is the date of the April “jobs report”, so the markets may improve (or not) pending the results of that report.
In other news, retailer Aeropostale has filed for bankruptcy, which is testimony to my numerous prior posts that old-school shopping malls and big box stores are a thing of the past, replaced by Amazon Prime, online stores, and other forms of shopping. In addition, many of today’s clothing stores, which you and I likely shopped at circa 1988-1994 (with an Orange Julius in hand, as we walked to the indoor mall movie theater to watch Top Gun), are just not hot anymore, and are having a difficult time attracting today’s Gen-Y customer. Aeropostale, The Gap, Banana Republic, Old Navy, I just don’t see much future in those stores anymore. Since this should be focused on the TSP, and not Retail Fashion analysis, I will stop, but some fundamental changes need to happen in the retail shopping mall industry overall.
In the “Value-Add” column, I want to point out a benefit you have if you are a Blue Cross/Blue Shield member. I discussed this in 2015 but will refresh it here. My not-scientific poll reflects that 90% of BCBS members do not know about this, at least not the ones I know. It is called “Healthways” and provides for $25 gym membership, for each adult member ($25 for you, $25 for your wife, or $50 total) who is entitled to your BCBS benefits (children do not have access to this Healthways program). The link for additional information is here:
https://www.blue365deals.com/healthways-national-standing-25-monthly-fee-access-network-9000-gyms-nationwide
The site is somewhat difficult to navigate, sometimes it is better to call a real human and talk to them. The phone number for additional information is 1-888-242-2060.
I remain 50% S-Fund and 50% C-Fund. 2050 remains an important support level on the SP 500. Please note that in the next week or two, I will send out a Poll to all subscribers, as I seek to continue to capture reader preferences and opinion. The last poll was in April 2015, and almost 2,000 folks replied. The past poll is here: http://www.poll-maker.com/results258354x7A08455c-10#tab-2
Thanks everyone, hope everyone has a great weekend and remember to call Mom on Sunday….
-Bill Pritchard
