Monthly Archives: September 2014

Hello Everybody

Today is Sept 30; the markets have continued to decline since my last update on Sept 25.   It is worthwhile to mention that since August 7, I have expressed my personal opinion regarding concerns that the market is weakening and becoming a risky place to be in.   Since August 7, I have been 100% G-Fund.   I got a few reader emails regarding being over-conservative and some “missed gains” but I stand by my opinion that the markets are deteriorating.  I have wished and hoped for positive signs, and believe me, watch the market everyday, searching for a slice of good news or rays of sunshine between the storm clouds, but have not seen any yet.

Today we had another Distribution Day in the markets, and according to the folks over at Investors Business Daily, we are at 7 Distribution Days for the NASDAQ and 6 days for the SP 500.   I include “almost distribution days” in my personal assessment of the markets, as “almost days” are important to be cognizant of, even if not technically qualifying as Distribution days.   We have had a handful of “almost days” in both indexes.   As discussed on this site, multiple days of distribution, typically four to seven, within four to six trading weeks, tends to stop existing uptrends and reverse them into downtrends.   We are basically at that point now.  

Lets look at some charts.  I used SPY ETF for a better snapshot of volume activity of the SP 500.  Note that 1965 is the new support level for the SP 500.   Any penetration below this level is yet another warning sign of an upcoming (and now probable) Bear market.

As we can see, the index continues downward, with increased volume during the recent few days.   It should be noted that a frequently used Small-Cap Index, the Russell 2000 (the TSP S-Fund will behave very close to this index), is already below its 200-day Moving Average, which is a Bearish (negative) sign for small-cap stocks.

It is valuable to consider the fact that prior bear markets caught most people by surprise, this occurred in 1987, in 2000, again in 2008 (although less so, most woke up to the fact that a grave crisis was in the works), and will probably occur again this time around.  History almost always repeats itself.   In almost every case, investors were riding the euphoria of a prior bull market and “good times”, and with their heads in the sand, got blindsided by a bear market.   However warning signs exist, all documented on this site, of a possible looming bear market.  This can occur gradually “death by a thousand paper cuts” or can start with a huge slam down, then a continued, but gradual, downward trend.   While one cannot predict the severity of the next bear market, one can control his exposure via allocation decisions and diversification, to include being entirely out of stocks all together.

Now, the market may magically reverse direction tomorrow and go to the moon.   And if anybody wants to be out of G-Fund, it is me.   But, I don’t see that happening.

In summary I continue to remain 100% G-Fund.

I ask that everyone continue to share this site with friends and colleagues.   Subscriber numbers have gone into the stratosphere, and I want to keep the momentum going.

Thanks and talk to everyone soon

– Bill Pritchard

Good afternoon from a major airport Admirals Lounge and Wi-Fi….

In the “I kinda mentioned this” category, today the market’s engine lost a few more cylinders, with the Dow Jones index dropping 250 points in one day (we have approx 2 hours left to go….present time is 12:55 PM Central Time).

Financial media is advising that this is the largest decline in 8 weeks.   Note that this is on HIGH VOLUME….this is clearly undesirable behavior.

Note additionally that I personally cannot find any other TSP information site, or even most of the major market news websites, that has taken the lonely position I have held since August, in which I presented my opinion that the market was weak and subject to additional declines.   Since August, I have been in G-Fund and continue to remain in G-Fund.

Talk to everyone soon….I will be boarding a flight soon and off the air for a few days in travel status.

– Bill Pritchard

Good Evening

I will keep this update brief, as I am TDY on the road, so no cool charts this post.   It is also almost midnight and just got out of my “simulator training” which means torture for 4 hours in the flight simulator, testing the pilot’s ability to deal with engine fires, ice covered runways, blown tires, and other things.   Prior to that was 4 hours of “ground school” consisting of questions and answers and refresher on aircraft systems and procedures.  So my brain currently is not fully operational.

Long story short, the markets continue to display weakness (since August 7, I have spoken regarding the market’s apparent weakness and lack of volume) and the markets have not celebrated the recent Federal Reserve Chief Janet Yellen’s comments regarding the economy.   The media was speaking highly of the “good news” associated to this meeting, one news of which is no apparent acceleration of the date of the looming Summer/Fall 2015 interest rate hike.   The markets did not “jump for joy” over this, and were up, I believe 40 to 50 points on the Dow for the day.   I knew something was wrong as soon as I witnessed this lackluster response.

Recent sessions have seen above average volume and selling, aka “distribution.”   As stated here, multiple days of distribution, typically four to seven, within four to six trading weeks, tends to stop existing uptrends and reverse them into downtrends.  The Distribution Day count is five for the NASDAQ and three for the SP 500 since Sept-3 and a few “almost distribution” days on both indexes.

The Russell 2000 Index, depending on what metric you use, is arguably already in “bear market” mode.  This index tracks small cap stocks and behaves very similar to the TSP S-Fund.

Observers will query me,  “But we have made new highs”.   Well, yes, made them, only to reverse down every time we “make a new high.”   This is not the action associated to a healthy, energetic, uptrend.   The 4540 NASDAQ and 1983 SP 500 levels have been violated, these were discussed in my last post.

I will post updates as needed over the next week or so.  My stated belief that G-Fund is safest is still intact.  To emphasize, my personal opinion is that the markets are displaying weakness and their behavior is a possible prelude to a new Bear Market/downtrend, potentially damaging to TSP account holders exposed in stock funds.   This is my personal opinion.   Sometimes you gotta be strong when skeptics exists….I am sticking to my guns (no pun intended….) and stand by that position.   Observe that I am more concerned with loss protection than gain realization, as gains (the “scoreboard”) will take care of themselves.  Catastrophic losses however, are something difficult to recover from.

Thanks everyone…..talk to you soon

– Bill Pritchard

Hello Folks

Well, the markets continue to display weakness and low volumes, albeit their arrival to All-Time-Highs in prior days.  It is almost as if they have coasted uphill, with no engine power, and are slowing down, running out of speed and momentum.   Yes, the powerless car has coasted up the hill and has travelled a pretty good distance, but what is under the hood ?  Is the engine still functioning properly?    Do we want to get into this car and trust that it can transport us somewhere ? 

Above are the the most recent charts of the NASDAQ Index and SP 500 Index.

Scrutiny of these charts will reveal the obvious “All-Time-Highs” achieved on Sept-4 for the NASDAQ and Sept-3 for the SP 500, however on both dates the indexed opened “up” in the morning and closed lower than the open price, on above average volume.  So while yes, a new “High” was achieved, it was in the initial opening stages and the markets sold off both days after the high was attained.

Also note on Sept-2, the first day after the Labor Day weekend (Monday Sept-1 the markets were closed), Wall Street appeared to be in good spirits, with decent uptick and buying on the NASDAQ.   The SP 500 was ho-hum on Sept-2, not hugely up, and not down.  However since Sept-2, the markets have seen some “Distribution Days” (discussed in depth on this site previously) which are undesired.   My own studies, combined with research and studies performed by the folks at Investors Business Daily, reflect that after four or five days of Distribution over a span of four to five weeks, the markets almost always turn down.    We have had two days of distribution and one day of “almost distribution”, on both indexes.   The clock has started on Sept-3 (Distribution Day-1), and we need to monitor additional distribution days thru Oct-3 (four weeks minimum).    Lets take a look at the charts again, but with my comments on them:

It is also apparent that the new support level for the NASDAQ is 4540 area, anything below that is undesirable.   The support level for the SP 500 will be 1983 area.     More important, well, just as important, is volume action.    If we hit say 1975, on low volume, ok, I am not losing sleep, although that is undesired action.   But if we hit 1975 on huge volume, major red flag.

To supplement my chart analysis is the Accumulation and Distribution Ratings from the folks at Investors Business Daily.   Basically, A is “good” and E is “poor”, with “A” representing huge institutional money in-flows to stocks, while “E” is heavy selling by institutional money (aka mutual funds, pension plans, hedge funds, etc.).    Lets take a look at the ratings for the SP 500 Index since Aug 27 (about two weeks ago)

So, going back two weeks, we don’t really see any huge changes in these ratings.   No major improvements to “justify” the recent uptrend which indeed has occurred.  I have been a skeptic of this uptrend, and chosen to pass on possible gains (those that remained in stocks did, indeed, achieve some gains) to instead monitor things a little longer.

To recap:

1. We have two distribution days since Sept-3.  
2. Volumes have been light until Sept-3, indicating a prior lack of interest by major money managers in accumulating additional stocks.
3. Yes, the index has climbed upward, however this is on low volume (#2) and my opinion is the “new uptrend” is suspect
4. 4540 NASDAQ and 1983 SP 500 are the levels to keep an eye on.
5. I am personally 100% G-Fund

As stated previously, I am tweaking my system somewhat (not hugely, however) as many have emailed me seeking a little more risk (and possible gains) instead of being conservative.   Not everybody mind you, some appreciate the conservative approach, but there exists a clear “fan base” if you will, that has voiced a tolerance for more risk.    This modified system is still in beta-testing and is almost worthy of a patent, but since my system is largely math-based, I doubt that a patent will happen (can’t put a patent on math).  It is also primarily NASDAQ based, versus SP 500 based, which arguably is becoming “Dow-Like” (Dow Jones Index is only 30 stocks).  The inclusion of the NASDAQ as a data source is showing promise. Expect a “roll out” of this system in another month or two.  

Please continue to encourage your colleagues to subscribe to this free site, and thank you for the great emails and the interest.   As a fellow TSP Participant, I have “skin in the game” and I put my name after every post.   If a similar site (and there are many) is not putting their personal name behind their product, what does that say about the product ?   

For those who view the site via the web (versus subscribe for email updates), I would encourage you to sign up for an email subscription.   This does a few things, 1) you get the updates mere seconds after I publish them  2) once received via email, you can refer back to it without having to rely on an internet connection.  3) Emails can also be printed and thrown in your briefcase etc.  Some of the updates reflect time critical information- email subscribers get the update immediately. 

Again, I am 100% G-Fund for the present time. 

Thank You for reading… 

– Bill Pritchard

* This update published 09-09-14 at 11:30 PM CDT