Monthly Archives: April 2015

Hello everybody

I received some emails regarding a “Status Check”, I am alive and well, thank you, however the only thing to really report is “more of the same” as the markets remain in a sideways range, bound by (SP 500) 2120 overhead resistance and 2040 support, with 2080 the “mid-point” between the levels.   See charts:

I am happy to state that the index has traded at or above 2080 since late March, reflecting an improvement in the health of the trend.  With a little luck, we get penetration of 2120 and thus a likely new uptrend.   I remain 100% S-Fund and see no underlying economic problems or market signals causing me to leave S-Fund.  From a pure performance perspective, I-Fund appears to be taking the lead, however, if and when the US stocks breakout, their performance could start to outperform I-Fund.   So I am hesitant to use a TSP move (two a month limit) only to have to change course soon thereafter.   In is my opinion that the S-Fund offers the ideal risk/reward tradeoff right now.  However we may likely see I-Fund to be the best performer in April once the data is calculated.

I will touch on some “background news” affecting things and report that China Central Bank will be easing its policies and relaxing credit requirements, due to a cooling economy in China.  This action, announced Sunday April 19, is not hugely different from our own Quantitative Easing which began in late 2008.   It could be argued that our QE program was largely responsible for the current Bull Market, and using that logic, a similar program in China may lift the Asian markets in a similar manner.  Lets take a look at the SP 500 chart and observe the trend reversal in early 2009:

Academic theory and complicated economic explanations aside (and plenty are out there…) about whether QE “should” exist or not (we are printing money, easy money, artificially propping up the economy, etc. are all terms thrown around), if the end result is a market uptrend, I am going to go try to make money off the uptrend while everyone else argues the value of the program.   I will be monitoring the “Chinese QE” (expect mainstream media to embrace this term – but to be clear, their program is similar in spirit, but not mechanism, to our QE) and looking for profit taking opportunities. The I-Fund, which duplicates the MCSI EAFE index, will likely benefit from China QE, due to that index’s exposure to Asian markets.

That’s about all I have for this post, again, I remain 100% S-Fund.   As discussed, I-Fund will likely outperform all funds for the month based on my calculations, however entering I-Fund right now (for me) carries some risk, due to the Greece situation (payment to IMF due in May) and some other things that are going on.   I may move to the I-fund next month.   Standby for that.

Thanks for the great emails…please continue to share this site with your friends and colleagues.   Talk to you soon everybody

– Bill Pritchard

Hello Folks

As we enter the middle of April’s first full trading week (April 1 and 2 was last week, and April 3 the markets were closed), the sideways action on the SP 500 continues.  On my prior post, I discussed what 2080 represented on the SP 500 index.  In a typical self-fulfilling prophecy, the index has stayed near that level and refused to find any direction (we prefer the upward kind of direction) whatsoever.   Lets look at two charts, one with no graphics, then one with graphics:

As is evident in the charts, the index continues to trade “sideways” and on low volume.   This is reflective of a market which desires a trigger event, to forcefully kick the ball up or down the hill.  Absent such an event, we may see continued lackluster action in the near term.   April monthly action (so far) indicates that the  S-Fund and I-Fund are neck and neck in terms of fund performance, with I-Fund taking a slight lead as of April 7 2015.  I would not jump in or out of anything right now, I personally desire to see a clear direction in the indexes before attempting to ascertain what fund is the clear-cut winner over the other funds.

Not surprisingly, is that all the panic and doom regarding interest rate hikes has subsided, and now (have we seen this movie before?) people are slightly embracing negative economic news as “good news” since this may result in a delay to the interest rate hikes.  NOTE:   See my Sept-10-2013 post regarding “good news is bad news” for a discussion of this concept.

In summary, I remain 100% S-Fund and await the market to find (hopefully) a new uptrend.  Cautious note is that mid-April thru mid-May is the release of corporate earnings and performance data for the first quarter of 2015, and this will likely push the markets one direction or another.  Until then, sideways action, in and of itself, is not a bad thing, and I see no warning signs or chart signals causing me to exit stock funds.  I remain 100% S-Fund at the present time.

Thanks for reading and please continue to share this site with friends and coworkers.   Talk to you soon everybody…

– Bill Pritchard

Hello Everybody

An update that the S-Fund has been declared by TSP.gov to be the top performer in March.  In a challenging investing climate, this was the only stock fund with positive returns.   All other stock funds were negative.

https://www.tsp.gov/investmentfunds/monthly/monthlyReturns.shtml

http://www.govexec.com/pay-benefits/2015/04/tsp-has-slow-march/109072/?oref=river

It would look bad to “take credit” for being right, but the fact remains that I was in this fund the entire month, as were many subscribers.

Screen shot is below:

Regarding the market, trading on April 1 (first day of the second quarter….”first days” are important from a set-the-tone standpoint) was difficult indeed, with the Dow Jones index closing down 77 points.   My benchmark index, the SP 500, hit a low of 2048 then closed at 2059.69; round it to 2060 and that is fine for our purposes.   Remember that the 2040 level is something to keep an eye on.  In addition,writers at marketwatch.com are basically repeating what I have already told my subscribers multiple times regarding the market and various technical levels.

I want to discuss another “tool” in my toolbox, and while this may sound like Greek and be clear as mud, I am going to discuss it anyway.   Based on some reader emails, the subscribers enjoy my charts and methods, and have desired additional material.   So let’s get started…

The overhead resistance level (since the most recent uptrend peaked out late February) is 2120 and the support level is 2040, for the SP 500 Index.   This is a “spread” (for lack of better term) of 80 points (2120-2040=80).

So the “mid-point” between these levels (40 up and 40 down) is 2080.   Due to the increased volatility and uneasiness in the markets, we must utilize additional tools to determine behavior, so lets use the 2080 level as the short-term barometer regarding “health” of things.   If the SP 500 has activity above 2080, that is positive, as this means it will hopefully continue towards 2120 and break-thru the 2120 level.   Activity below 2080 is not desired, and as it moves closer to 2040, then it is time to become even more concerned.  See chart with poor graphics:

This method can be used to answer the question “On a short term basis, does anybody have any clue on the short-term trend ?”   Or from an operational perspective, if the SP 500 has 2 weeks of closes at 2095 versus two weeks at 2055, by using the 2080 level, we know that 2095, while not 2120, is not entirely bad and we probably don’t need to completely panic.   Etc scenarios.  The above method can assist with this.

In summary, I remain 100% S-Fund.   SP 500:  2040 is support, 2120 is resistance, and 2080 is our short-term barometer.

Thanks for reading and talk to you soon….

– Bill Pritchard

Published March 31 2015, 11PM Pacific Time

Hello Folks

Well the first quarter of 2015 is behind us, and my preliminary data shows that the S-Fund was the top performer for March, followed by the I-Fund, then C-Fund.  This is my own personal assessment, we need to await TSP official results for the “real” info.

The Dow Jones Index is negative for the first quarter, the SP 500 and NASDAQ are slightly positive, but not much.   This has been a turbulent quarter.   I remain in stock funds only because my assessment reflects that the underlying economy and “structure” of things appears solid.   Fed Rate jitters abound, to some extent (or to a large extent) magnified by mainstream financial media.  Richmond Fed President announced a few days ago (thankfully the FOMC is multiple people) that a “strong case” exists to raise rates.   However he appears to not be paying attention to the very data that Ms. Yellen stated was important, namely the PCE Inflation data, which is still lackluster.   I repeat my manta, without BOTH PCE Inflation Data and the Jobs/Labor data (which yes, is where it needs to be), we will not see a rate hike.

I am disappointed to report an increase in “Distribution Days” on the SP 500 Index, this is a concept pioneered by Investors Business Daily (IBD) newspaper reflecting “sell off” days in the index, or outflows of institutional money.   Numerous days can change the direction of an index and send it into a downtrend.   We indeed have had numerous days, and the IBD Accumulation/Distribution rating has fallen from a prior “B” to a current “C” (worsened) as of March 31.

Lets take a look at the recent SP 500 chart:

As seen, it is apparent that the index is “range bound” with 2040 being the support level and 2120 being the overhead resistance level.   So we need to keep an eye on this, and anything below 2040 is a red flag and is undesired.   Also note that (based on my chart settings) we have had below average volume on most days, with two recent above average volume distribution days.

Unfortunately, Equities Index futures are trading drastically lower in the March 31 evening trading.   The Dow Jones futures are 100 points to the negative, which is reflective of a possible challenging day in the regular stock markets when they open for trading on April 1.   Chart:

It is my opinion that if we can keep market fed rate jitters to a minimum, keep ISIS and beheader Jihad John off Twitter and cable news, and keep airliners from mysteriously crashing or disappearing into the ocean, the market could do very well.   In addition, we have “Quarterly Earnings” reports coming out in April, and the below companies arguably can represent what is happening with the larger economy, so we need to pay attention to them:

AAL – April 24 earnings release

UPS: April 28

AAPL:  April 27

JPM: April 14

XOM (Exxon): May 4

GM:  May 7

I remain 100% S-Fund at the present time.  However ultimately, we must react to the market itself, so it is important we monitor the action on the indexes and keep an eye on 2040 on the SP 500.   As I stated above, April 1 regular market trading may be a challenging day.   Allow me to be direct:   The market is displaying weakness and a move to G-Fund may be looming ahead.

That is all for now….if you find this site informative please share it with your friends and colleagues.   Thanks for the numerous great emails, I must say I am quite impressed by the subscriber growth so far.

Thanks and talk to you soon…

– Bill Pritchard