Monthly Archives: March 2016

Hello Folks

I am happy to report that I am exiting the G-Fund and returning to the stock funds, more specifically 50% S-Fund and 50% C-Fund, via interfund transfer and a contribution allocation reflecting this percentage (FAQ #10).   Small Cap stocks (S-Fund) have performed very well in recent weeks, however it is probable that Large Caps (C-Fund) will also be responding well, thus I am getting some exposure to both funds.

Recent market action reflects a growing uptrend, on lackluster volume, however the market volume picked up the afternoon of 03-29-16, after FOMC Chairwoman Yellen spoke regarding her assessments of the economy.  In addition, the SP-500 futures trading during the evening hours of 03-29-16, broke to a new recent All-Time-High, reflecting positive sentiment in the evening hours.  See chart:

This return to stock funds is a welcome event, nobody enjoys sitting on the beach while everyone else is out in the ocean playing in the waves and enjoying their surfboards.  However I believe the continued position in G-Fund will cause me to miss future gains, and that the market environment is indeed much less risky than 60-90 days ago.   At some point, we can’t “risk assess” ourselves out of existence, at some point we have to get out of bed, and go out into the world and face whatever obstacles come across our path.  There are only so many factors one can control, or influence.  Based on my review of the chart action, the improving volume action, and the Accumulation/Distribution activity in the indexes, I feel that the threat level is much reduced, and a return to stock funds is justified.   Just FYI that things may go south, depending on how the elections go.  Let’s stay alert and aware.

Again, I will be 50% S-Fund and 50% C-Fund.   Any TSP changes submitted by COB on Wednesday should take effect by Friday evening.  If the market dips slightly over the next few days, that is fine, you are entering while it is slightly down.   Remember, we are looking at long-term behavior (note that I have been in G-Fund since August) in the markets, not one-day or even one-week cycles.   This serves as partial explanation as to why I only post every week to two weeks.

Thank you for reading, hope everyone is doing well.   Have a great week

-Bill Pritchard

Hello Everybody

Thank you for the various messages and emails, let me say that if anyone wants to be out of G-Fund, it is me.  However for a variety of reasons, I remain 100% G-Fund.   Allow me to explain.

Since the apparent finding-of-support on Feb-11 at 1810 area by the SP-500 Index (see chart), the index has climbed upward, almost on a daily basis.  “Let’s get back in, we are missing gains” is often mentioned (typically via strongly phrased email!)   Well, while technically correct, yes the indexes have gone up, getting back in carries additional risk of being creamed if the markets go south, as the volume levels since Feb-11 have not been anything (in my opinion) to help protect against downside moves.   Let’s look at a chart, as pictures are worth a thousand words, and sometimes my words are clear as mud.

As can be seen, volumes are below average, with the exception of Friday March 4, which was slightly above average, and which was discussed in my post dated Monday March 7, in which I shared my observations regarding the prior week.    If you take a look at the red box, above, this reflects volume action since my March 7 post, you can see that it is below average.

In my self-assessment, I determined that in our hunger for an uptrend, in our desperation to exit the G-Fund, that confirmation bias is happening, and the financial media is suffering from this also.  Confirmation Bias describes our tendency to seek out and trust information that confirms what we already think or believe or want to believe, and to avoid or discount information that goes against what we believe or want to believe.  Imagine driving down a strange road at night, and your co-pilot (possibly a spouse) has reminded you numerous times that you indeed seem lost and unable to find the correct street.  Your IQ, vision, and decision to even get married have been mentioned by your co-pilot, as you haplessly navigate the dark neighborhood.  Soon, your headlights illuminate a green street reflective street sign, and, surprise, you activate the turn signal and announce that “this is the street.”   Sadly, it was not the correct street, and your spouse is even more vocal.   Another example is the airplane pilot, attempting to land at night on a foggy runway, he sees streetlights and starts to descend to land, only to crash the airplane due to mistaking the street for the runway.

Folks, I don’t want to fall victim to this, and continue to remain in G-Fund.  I sheepishly admit that I partially indeed had some confimation bias, but a little cold water on my face and “stepping back” and disconnecting from all the stimuli has put a stop to it.  You and I both want to be out of G-Fund, but me personally, not yet.    I believe that the FOMC Meeting, due to conclude on March-16, and Crude Oil prices, are the market’s challenges right now.   Crude Oil, previously close to $39, has backed away from that, returning to the $36 area.  See chart:

In addition, the good folks over at Investors Business Daily are reporting five (5) Distribution Days on the NASDAQ index.   Research has shown that four to seven Distribution Days within multiple weeks is a negative sign and typically will put a stop to any new uptrends.

As anyone who is not living in a cave knows, the evening of March 15 witnessed the results of the most recent voting.  I won’t get into politics here, but the below chart reflect the SP-500 futures (which trade overnight) and their reaction once the results were in, regarding the voting (they reversed).

The reader will be pleased to know that my oft-unintelligible rantings are about to conclude.   In summary, the volume just is not there, and we are in a dangerous situation because volume is the legs that keep the table off the floor.   Weak legs and the table can topple over.  I hesitate to jump back onto the table yet.   100% G-Fund for me until further advised.   Watch that confirmation bias.   And always bring a GPS.

Talk to you soon…

-Bill Pritchard

Hello Folks

I am happy to report that the markets did pretty darn well last week, with the SP 500 breaking the important 1950 level.   However, volume could have been stronger, but was not weak, per-se.   I however would prefer some additional volume above its average volume, just as a confirmation sign that “the move” (the price movement of the index) is indeed real.   Lets look at some charts:

March 4 volume indeed was above average, but very slightly.

Unfortunately, the markets remain married to the price of Crude Oil, which is now trading at $36 per barrel, depicted on the chart below:

I say “unfortunately” because right now, whatever Crude does, the stock market will do, which means our TSP stock funds and the US stock market is unfortunately at the mercy of oil ministers in the middle east, and will respond to whatever public comments those oil ministers decide to make for radio and TV broadcast.  In US-based news, on Friday March-4, the “Jobs Report” was released by the Department of Labor, reflecting a 4.9% unemployment rate in February.   This rate is very good, which could prompt a return to “Good News is Bad News” thinking, as a strengthening economy, reflected by numerous indicators (the Jobs Report is one), may signal to the FOMC that interest rate hikes should continue on schedule.  Rate hikes tend to dampen stock markets.   However, by all appearances, the markets “liked” the Jobs Report and rallied higher.

Some important events will happen this month, on March 10 the European Central Bank (ECB) will have a meeting to discuss their fiscal stimulus efforts in the region.  Any plans for additional stimulus will likely be positive for the markets, at least in the short term.  Additionally, there is an FOMC Meeting on March 15-16, no doubt that rate hikes will be at least discussed, whether rates are actioned-on is another story.

In summary, we have 1950 penetrated, but I would like the volume to improve.  No, I am not going to wait ten more years for the volume.   I remain 100% G-Fund, however to put this into language we all understand, last week’s action has caused me to come out of the holster, and into a ready position, with my finger resting near the S/C Fund trigger guard.

Thank you for reading and talk to you soon…

-Bill Pritchard