Hello to everyone
This week began on a positive note, with the SP 500 and other indexes closing up on Monday July 1. The trading volume was not as high as I would have preferred, and as such, these “up moves” have questionable credibility. Volume is the horsepower behind the move, and it is not where it needs to be yet. The perfect day is an “up day” (end of day closing price is higher than the start of day price) on above average volume, ideally 25% (or more) above its average trading volume. These two things, when occurring during one trading day, is a positive thing. Not one, not the other, but we need both.
Note that this week will likely see light volume the entire week, due to the July 4th holiday and reduced trading activity this week.
My personal observation is that we are looking for the SP 500 index to CLOSE at or above 1630 on multiple back to back days in order to believe that any new upward movement in the indexes are for real. Let’s see how the next week or two play out. It should be noted, that the months of July-August-Sept are historically (absent a few occasional deviations from this trend over the years) the worst performing months of the year. What does this mean? It means that if July 2013 is “down”, this does not mean that the world is ending. Historically, July (and August and Sept) tends to be down. Of course, we let the market tell us what to do, and if Mr. Market decides to give us great returns in July, I am not going argue and will take what he gives me.
On July 2, the indexes performed well during most of the day, then turned downward in the afternoon, with the SP 500 closing below the 50-day Exponential Moving Average (EMA), which is a key trend line, to help determine trend and health of the market. The 50-Day EMA is 1611. This EMA will change as the days ahead progress, but for now the thing to be aware of is that a “close” (last price the market traded at when it closed/stopped trading for that day) near or below 1611, is not desirable.
Let’s take a look at two charts of the SP 500 Index, one with a 3 month view, and the second chart being a 1-month view, with my comments.
I am personally still “long” (holding stocks that I bought) in my personal brokerage account, and since they are still doing relatively well, I have held on to them. However, my TSP Allocation is 100% G-Fund. I will monitor things and advise everyone as warranted. I recommend everyone watch the SP 500 index and keep their eyes out for activity at or above 1630. The remainder of the week will likely be low trading volume and thus, whatever happens, is probably not worth considering for our decision making. If you turn CNBC off the rest of the week, you probably won’t miss much.
Thanks for the interest in the site, and if you find the site informative or useful, please pass it to your friends and coworkers. I have received quite a few nice emails this month, thanks for those.
Take care everybody
– Bill Pritchard
