Well, like most folks, I just want this week to be over. I mean, wow, just wow. Almost 400 points negative on the Dow on Thursday. Someone stop the bleeding.
As most market watchers know, all the stock indexes are down hard, due to multiple factors, mostly 1) the approaching September Federal Open Market Committee (FOMC) meeting in which interest rates may be increased, 2) Reports that the economy in China is slowing, and 3) Oil Prices at record lows. Oil is at $42 a barrel, most in the industry feel $55 a barrel is where it needs to be for oil companies to be profitable and not lay off workers, yet allow prices at the gas pump to be not so expensive that it affects consumers.
While one should never argue or try to fight the market, I remain 100% S-Fund. Had the above market behavior occurred in 2012, using my 2012 methodology, I probably would have been G-Fund by now. However, I am running my “2012” system (in other words, exact same system as 2012 and prior, we can call this system Fed Trader 1.0) along side my beta system (a tweaked version of 2012), this Beta system was discussed in my Sept 10 2014 post, and my decision is to remain 100% S-Fund. The beta-system is not for public consumption yet, however I do run it side-by-side with my other indicators.
It is important to mention that August and September are already documented in history as being bad months. So even without interest rate fear mongering, or China issues, or other challenges, it is ops-normal for August and September to be poorly performing months. Bring some headline news issues into the picture, and what do you get ? You get a week like this one. Using my weather analogy, if you are in Miami in August and surrounded by thunderstorms, it does not mean a Hurricane is coming. Now, couple this with “Hurricane talk” on Twitter, cable news shows, and the Wall Street Journal, and now magically a hurricane is now approaching, even if only imagined.
Indeed, the raindrops are real, no argument there, and I suppose the question is “how much rain can I take” before we move to G-Fund. I guess my answer is this, if you already went to G-Fund, nobody will second guess that decision. However, me, personally, I am still in S-Fund, in light of the above observations. All funds are down this month, and we will likely see I-Fund as having taken the majority of the damage, and thus be down the most.
I invite folks to read my prior two posts, published Aug 10 and July 27 regarding Interest rate hikes and on China.
Friday August 21 is “options expiration day” which for our purposes, all we care about is that volumes are increased (increased number of shares traded) on those days in the markets. This makes it harder to assess what the market is “really” doing on those days, as the volume picture is clouded by the options expirations.
Everyone try to enjoy the weekend, something inside me tells me this storm cloud will pass.
Talk to you soon….
– Bill Pritchard
