Monthly Archives: December 2013

Just a quick message to wish everyone a Happy New Year, as in less than 48 hours, we will be welcoming in 2014, and saying goodbye to 2013.    A very brief recap of the past few days action reflect that a new high was made on the SP-500 on Dec 27, 2013, attaining 1844.89 on the index.

The last few days have been on low volume, however I am always receptive to new highs on indexes, low volume or not.   Also, the I-Fund has flashed some strength, and the top funds, performance-wise, have been I-Fund and S-Fund over the past five days.

Allow me to say THANK  YOU to all of my loyal subscribers, for the great comments and words of support regarding this site.    While I do not claim to have a crystal ball or be able to guarantee performance returns, if this site has stimulated some proactive TSP management, and improved some folks returns, than I have accomplished a lot.   This site has seen huge subscriber growth in 2013, and this is largely due to word of mouth from the subscriber base.  One of my wishes for 2014 is further growth of my subscriber base, and the only way to accomplish this is via me, delivering a quality product to the subscriber, who in turn will refer this site to others.

Everybody have a safe holiday…from my family to your family:  Happy New Year. 

– Bill Pritchard

This past week in the markets was very good, with the S-Fund outperforming all funds, and C-Fund taking second place.     There are no indications that this performance will change anytime soon.   As we enter Christmas week, trading will be light, as the U.S. securities markets will be closed at noon CT on Tuesday, Dec. 24, closed on Wednesday, Dec. 25 for Christmas and closed on Jan. 1 2014 for New Years.  I personally don’t see any huge market volume or activity coming back until Monday, January 6, 2014.   In other words, December’s action, for all intents and purposes, is “over.”

On Friday, Dec 20, the SP 500 index closed up on huge volume, hitting a new 52 week high of 1823.75.  See Chart:

As reported in my November 5, 2013 post, December is historically the best performing month out of the year, and while it got off to a rough start, I am quite pleased on how things have turned out (again, December is basically done now, trading-wise).   

It should be noted that on Sunday, Dec 22, the International Monetary Fund (IMF) made news by stating that it believes that the US economy is expanding faster than previously thought, and expressed a positive outlook for 2014.   This news was via statements by IMF Director Lagarde, and not in the form of an official press release/etc.   However, this has the potential of lifting the markets even further.   Readers will recall my prior hospital patient analogy, regarding the recovering US economy, and not shocking is the fact that we are starting to see independent reports and data confirm my prior statements.  I had the pleasure of eating breakfast recently with a Regional VP (for my geographic area) of a major US shipping company (I won’t name it but they paint everything one color).  This person reports directly to the HQ in USA.  Sometimes field interviews are much better than fancy reports, charts, and economic theories, and being on the street is where you see what is really happening.  I asked him “how did 2013 work out” and “are things coming back, from your point of view” and his response was overwhelmingly a “yes.”    

I have had some great reader mails, thank you, and a few have asked the legit question “is the market’s run is almost over.”   This is based on the observation that the SP-500 Index has been in an uptrend since basically 2009.   While true, it has only really taken off since November 2012.   I base my opinion, on two things, the use of the 200-day Moving Average as a trend signal, and the price of gold.   The financial industry typically views a penetration or “touching” of the 200-day MA as being a bearish signal, reflecting that the market/index is not fully healthy.   As my chart (with comments) below shows, not until 2013, did the index NOT touch the 200-day MA the entire year.   See chart:

In addition, I use the price of Gold as a secondary indicator (remember, the market itself is #1 indicator) as to how things are playing out.  Gold, is the “safe haven” for major market players in times of economic turmoil, war, or when fear is in the air.   Money is believed by some (me included) to be like fluids, and when fluid flows from one “container” (Gold, Bonds, Stocks, etc.) this means that it must flow to another container.   Students of fluid dynamics and system dynamics believe that one component of a system affects other components, similar to a heart which determines how fast your legs can run.  The heart may be more important than your leg muscle, and both need each other for a successful run.  With that said, many believe that money (fluid) leaves Gold when equities/stock markets are recovering, and further invests in stocks, thus sending them higher, and when stocks are doing bad, money goes elsewhere, to other investments such as Gold.  Gold is also important as it is the “default” currency, worldwide. 

The last major price peak of Gold occurred in October, 2012, and its price has been on a decline since, reflecting money outflows, and inflows into something else.  Note that since 2009 until October 2012, while the markets, yes, were up, Gold, also, was up, indicating that the world was not quite ready to dive head first into the stock markets.  In addition, 2009 up until Nov 2012, the SP 500 index had a couple of “rough patches” and violated the 200-day MA.    See Gold chart:

However this apparently changed in November 2012 (one month after the peak in Gold prices), as this was the start of a new uptrend in the SP 500 index, and in January 2013, after assessing the November and December behavior, and post-Fiscal Cliff resolution, I made the decision to return to the S-Fund.   Many of my readers have mirrored my TSP moves, and we all enjoyed a great 2013.   It is my opinion that the current bull market only “really” began in November 2012, and that 2014 is likely going to be a good year.

My TSP Allocation remains 50% S-Fund and 50% C-Fund.   I hope everyone has a Merry Christmas and Happy New Year, and I will see everybody after the holidays.  Thanks

– Bill Pritchard

Hello folks

Well, to say that Dec 18 was a “good day” in the markets would be an understatement.   The FOMC released a statement, after having met on Dec 17 and 18, and said that they plan to start a very gradual tapering of QE in January of 2014.   Note that this is mostly in line with my Dec 10 update on this site, in which I stated that the FOMC would “take no action” on QE until 2014.   My opinion was somewhat correct, but not completely, as the “action” they took was the decision to start the taper.   However the actual taper will begin in 2014.   2013 will finish out unchanged and with no tapering activity.

The Dow Jones reacted with a gain of 292 points, and some sites (I have not personally done the math on it) reported that any and all losses in the markets in December, were reversed, in today’s strong action.   The SPY tracking stock, which mirrors the SP 500, traded 50% above its average volume, clearly a strong sign of credibility behind the move upward today.   This reflects that institutional money returned to the markets today, in large numbers.

The Washington Post published an opinion piece today, in which they basically repeated what I already told my subscribers in Point #4 of my December 10 post, regarding my position that the economy is indeed recovering.   Allow me to pat myself on the back and state that my subscribers received basically the same analysis eight days ago.

Small cap stocks (S-Fund) responded well, and outperformed everything else today, with large cap stocks (C-Fund), taking second place, and international stocks (I-Fund) taking third place, in daily performance.   This market reaction is in accordance with my existing TSP Allocation.  The TSP funds which gained the most, one-day, on Dec 18, were not the L-Funds, G-Fund, F-Fund, etc, but S-Fund, and C-Fund.   Readers may note that my personal TSP Allocation has been 50% S-Fund and 50% C-Fund.

Readers may recall my Sept 10 post, in which I stated that markets do not like uncertainty on important issues.   The reduction of QE, a federally driven program, and impacting world financial markets, is clearly in this category.  However for a large part of 2013, the markets have been handicapped by this fog of uncertainty, and in recent months, have displayed difficulty navigating higher thru this fog.   Not shockingly, when the FOMC made its position known today (with no taper action until 2014), the markets swallowed this like a hungry animal.   The modest taper (versus a more aggressive taper) likely contributed to this, which was basically the FOMC saying “We are tapering, but…”   Note that if the taper was more aggressive, my position remains that the market would have received this as negative news.   Instead, the FOMC decided it was time to leave the kiddie pool (ankle-deep) and move to knee-deep water.     In what appears to be a sound decision, the FOMC has decided that the diving-board deep side of the pool is not something the economy is ready for yet.

In other news, reports on new home construction reflect that in November 2013, more new homes have been built, that at any other time in the prior 5 years.   This added additional propellant to the rally.

I have no cool charts or graphics today, as my TDY internet wi-fi (thank you Residence Inn) is extremely slow.

In summary, today’s events are very positive and I am very optimistic for things in the near future.   Lets see how December finishes out.   Expect some naysayers to come out of the woodwork and some slight sell offs in the next few weeks.   However you don’t go up 292 points in one day, for no reason.     My current TSP Allocation remains 50% S-Fund and 50% C-Fund. 

Thanks for reading and talk to you soon…….Bill Pritchard

Hello folks

I am happy to report that so far this week (all two days of it), the SP 500 index has regained some of last week’s lost territory, and on December 9, came close to hitting its most recent 52-week high, 1813.55, which was hit on November 29.   The “1800 to 1810” area appears to be the most recent obstacle course, as anytime the index enters that territory, it gets dragged down and sent back lower.   My opinion is that if the index can clear and remain above 1810 for multiple sessions, this may open up the highway ahead for additional gains and new higher territory.

The market is likely concerned over the December 17-18 Federal Reserve meeting, in which (yet again) some believe a reduction of the QE program will be discussed or decided on.   Additionally, some nervousness existed regarding the lack of a budget deal, however this should be subsided going forward now that a budget deal was agreed to this evening, as reported by the Washington Post.  The article reports that the federal government is now funded thru the fall of 2015.  The article also reports that the two-year slide in federal spending is “reversed.”   

The SP-500 futures responded positively to this news, then traded flat for the remainder of the evening session.   Lets take a look at some charts to assess how the market is doing.   The first chart is “close only” chart, in other words, it shows only the closing level of the SP-500 index each day.  This is helpful to see thru the daily noise and volatility as the “close” is the point everybody went home at.  The next charts depict the normal daily trading, with the full day’s price activity displayed.   Observe that the first week of December reflected selling, based on lower closes and above average volume.   This is clearly not desired and is a “warning sign” that I look for, regarding possible new Bear markets / downtrends.  

Normal, unmarked SP-500 Chart, for review, prior to third chart, which is same chart but with my comments/annotations:

Same chart, with my comments/etc.

Please send me a reader e-mail if my charts are confusing or seem like voodoo. 

Observe that this week, volume has been less than average (so far), likely due to people staying on the sidelines in light of budget uncertainty (resolved this evening) and the Dec 17-18 Federal Reserve meeting.

Being that a reduction in QE will almost certainly impact the markets, in a negative manner (for how long, is not known), my “take” on this, is that the Federal Reserve will not take any action regarding the QE program during this meeting (they will likely address it early 2014), because:

1.  Congress is on Christmas break Dec-13 to Jan-7  2014.   I doubt any decisions (and subsequent announcements by FOMC) regarding a critical economic program will be announced by Obama/FOMC/etc. while Congress is out of the office.  Some of the members of the Senate and House banking/finance committees would likely desire to be cc’ed and/or participate in any such news announcements, and they will be on break.

2.  Any such news will be initially received as negative and a sell-off in the markets will likely occur.  The private citizen aka voter, who is making holiday preparations and putting up his Christmas tree, does not want his holiday period ruined.  As such, I doubt the FOMC will be looking to drop bombshells over the holidays.   NOTE:  The FOMC is not “elected” by voters, however any bad news will be attributed/associated to the political party/politicians in office.  The FOMC Chairman is nominated by the President.   

3.  And, 2013 has been a tough year, in the politics category.   Between sequestration, fiscal cliffs, furloughs, closed government offices, locked down National Parks, etc., the private citizen just doesn’t need yet another stick in his eye this year from Washington.    I am sure the Washington consensus is “lets get 2013 over with” and then this will be acted upon in 2014.

4. Any QE reduction announcements, when declared, will have some sort of economic stimulus or similar policy attached, to “soften” the blow to the markets.  Remember, QE reduction is because the economy is recovering.   And what does the voter care about ?  Jobs.   Employed people buy products, houses, make investments, and stimulate things.   Unemployed ones do not.   I anticipate some sort of new incentive regarding additional, further job creation or worker benefits to be announced when the QE reduction announcement is made.  This, in theory, will stimulate the economy even more, and help soften any hard drops the market may have on QE reduction news alone.  Also, the administration may be sitting on already existing good news or data and is waiting to “package it” with the QE announcement.

All funds are performing close to each other, and my personal TSP Allocation remains 50% S-Fund and 50% C-Fund. 

Thanks for reading, and please forward this update to your coworkers or colleagues that may find it interesting.    Thanks.

– Bill Pritchard

Hello folks

I hope everybody returned from the Thanksgiving holidays safely.   We are now into the month of December, and unfortunately the markets have started the month on a weak note, closing down on both Dec-2 (Monday) and Dec-3 (Tuesday).  Rudolf’s pleasant  jingle bells (does he have jingle bells ?) and Santa’s jolly laugh have failed to start.  Maybe it is too early yet.  Typically the first day of the month “sets the tone” for the rest of the month, so I am going to ask Santa to bring us some Holiday Cheer, if I can find him at the mall.

The SP 500 Index has departed the magical 1800 area, to the downside, and recent support is found at approximately the 1790 area.   In other words, any behavior below that is undesirable.  Today, Dec-3, the index displayed above average volume, while closing down, a “red flag” but not reason for total panic.   If we get multiple days like this in close proximity to each other, it may be a G-Fund Christmas instead of a white Christmas.   But lets standby for now and take a look at November’s TSP returns.  See image below:

As can be seen, the C-Fund (#1 monthly performer) out powered the S-Fund (#2 performer) in November.   However, YTD and Last 12 months, S-Fund is still the leader in performance.   Since October until present, C-Fund and S-Fund have been running close to each other, and my TSP Allocation is 50% S-Fund and 50% C-Fund at the present time.   I will advise anyone if this changes.  Out of ten fund choices, my system has put me into the top performer almost the entire year, and when not in the #1 performer, it was in the #2 performer.   So all year its been Walter Payton or Tony Dorsett.   Either one on your team and you are with a winner.    Note that I was in G-Fund for short bursts during the year, due some red flags (since proved false alarms) to my admitted fear of market crashes and account balance wipe-outs.  

Once again, I watch the market itself, for signals and red flags, and respond to those signals, and hesitate to speculate on reasons behind the moves.   With that standard disclaimer, it is my opinion that the fears of a reduction of the Quantitative Easing (QE) program are back in the air.

Also, the recent reports of Black Friday Sales being less than last year’s, have sent fear into the market.   Some Wall Street folks however might take note that while Black Friday was worse than last years, the folks who did not go to physical stores (Black Friday data is based on that) to shop, instead spent time on Amazon and other sites, ordering items.  One might observe that NetFlix basically put Blockbuster’s physical stores (and the company) out of business, when folks could stay home and save gas and avoid driving to Blockbuster only to find that their favorite movie was out of stock anyway.   Amazon (a few years ago it was mostly books) is credited with putting Borders Books out of business, and is presently giving my personal favorite hang-out spot, Barnes and Noble, a lot of heartburn.   Amazon (and other online retailers) are now challenging other old-school stores.   Unless you just want to get an Orange Julius or an Aunt Annie’s pretzel, why would anyone drive to the mall, burn gas ($4 a gallon), fight the crowds, park the car one mile away, only to find out that Grandma’s sweater size is not in stock.    I don’t.   Both last year and this year, I accomplished all of my Christmas shopping, to include physical gift wrapping, for my family and relatives, in multiple areas of USA, in one day, while in my pajamas.   Yes, that means it is December 3, and I am already done with shopping.  Any shipping costs (typically free if you order a minimal dollar amount) or sales tax that I had to pay more than offset the high PITA Factor (Pain In the A** Factor) involved with shopping for Christmas.  Note that most of the items were priced less than the same item in the actual physical stores.    I mean, I didn’t even have to get dressed, much less, leave the house.  Thank you Jeff Bezos.

With that said, ok, Black Friday’s numbers were low.   Is the world ending ?   Many “bears” on Wall Street would like to claim that.   We are all trained investigators, what do you think ?  

Lets take a look at the most recent SP 500 Chart (first image).   I realize we are only two trading days into December, but I wanted to post it anyway.   Observe that today the index closed lower (QE Fears and poor Black Friday / Aunt Annie numbers ?) on above average volume.    Which is undesirable.    Also, it is noteworthy that the evening SP 500 futures (white colored chart below) are trading up, and “found support” in the 1790 area, at least as of 9PM Central Time.   In other words, the low’s of the daytime session (which coincides with the daytime stock exchange session) were not violated, and the index is trading much improved during the evening session.    Charts/Images:

As a wrap-up, please FYI that Dan Jamison, of the FERS Guide, is retiring from federal law enforcement service after 21 years, effective Dec-4 2013.  Not surprisingly, he will utilize his extensive retirement planning knowledge in his retirement career.   Today, he released his most recent guide, which is posted under the FERS Guide link on this site.   Dan produced and authored all material himself.

Thank you for reading and if you find this site informative or useful, please share it with your friends and coworkers.     Thanks and talk to you soon.

– Bill Pritchard