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
