Hello Folks
Well the month of April is off to a great start, with the SP 500 index making new All Time Highs each day of the month so far. This type of behavior is very desirable and a clear indication of bullishness and strength. It appears the market has digested the Russia/Ukraine situation and is moving forward, past the prior worries associated to the emerging international markets.
Lets take a look at some charts, one without comments, one with comments, of the SP 500 Index:
On a 30-day look-back period, the C-Fund has outperformed the other funds. On a one (1) week look-back, the S-Fund has outperformed. My current balance remains 100% S-Fund, however 50% S-Fund and 50% C-Fund would also likely be a productive allocation.
The only negative associated to the market’s performance so far is that it has occurred on less than average volume. Numerous times I have discussed how volume is the “horsepower behind the move” and unfortunately the volumes have been light so far. Lets see what happens as the month becomes more mature.
Speaking of volume, the subject of High Frequency Trading has been in the news lately, with author Michael Lewis speaking of “rigged markets” and unfair advantages by professional traders. Lets take a look at a video by CNBC:
http://video.cnbc.com/gallery/?video=3000263240
The premise of this theory is that professional traders may be able to enter trades at better prices than the other guy, due to high speed trading systems and communications lines. I suppose a 5 cent advantage per share is clearly an advantage if you are trading $1B dollars. Why is this discussion important for the TSP investor ? Because my system (of which literally thousands of The Fed Trader subscribers read about, yes I can say that, thousands….) is more of a long-term trend following and momentum based strategy. I am not looking to gain a two-cent edge on the intraday price of Google shares. I am looking at long-term, behavioral, trends. Patterns of behavior. And while High Frequency Trading and all the (alleged) magic black boxes and secret programs may indeed give professionals some advantages, at the end of the day, you can’t hide the volume of shares traded. And volume tells us what is going on behind the scenes.
As an example, lets take a look at TSLA (Tesla) chart. This is a stock I traded personally, and was able to obtain some profits from. Keep in mind my often discussed theories of overhead resistance (in TSLA example it was $40 area) and “breakouts” and All Time Highs on above average volume. Was High Frequency Trading in play here ? I am sure it was. Did it matter for me ? No. Charts with no comments, then with comments.
Remember, we are looking for changes in sentiment, changes in behavior, changes in mood, when assessing the markets and individual stocks. If anyone saw the March 2014 print version of Money Magazine, a notoriously conservative (but high quality) magazine (any cover story will advocate bond investing), an article appeared which semi-endorsed momentum investing. Indeed, many find it difficult to buy All Time Highs, and instead buy on the way down, instead of on the way up. I caution against trying to catch falling knifes, and advocate buying strength, versus weakness.
This is directly applicable to TSP investing, as many in TSP land feel that every time the markets make a new high, that doomsday is around the corner and a market crash is pending. In my opinion, that way of thinking will negatively impact your rates of return.
I am presently 100% S-Fund for the time being. I ask that if you find my site and emails/updates informative, please pass them to others who may benefit. I had a reader communicate to me that this (completely free) site was “worth its weight in gold” as his TSP was up over $50,000 in the last 12 months, an amount not likely possible had this reader not become educated regarding the markets and TSP….this person had initially planned to be in the G and F-funds. Do you know anyone who seeks to become more educated and informed regarding the markets and its correlation to the TSP ? Please pass the word.
Thank you and talk to you soon…..
– Bill Pritchard
