Monthly Archives: November 2016

Good Evening

I am leaving G-Fund and will be 100% S-Fund until further advised.  All market indexes closed at All Time Highs, with the SP 500 closing at 2198.18, above the previously discussed 2190 level.  Volume, while not above average, was sufficient enough, in my opinion, in light of the holiday week, to return to stocks.    The best performing stocks are Small-Cap stocks, aka S-Fund.  Observation:  In a new bull market, small caps always perform best.  Then towards the end of a bull market, large cap stocks outperform.  So some theory exists that we may be seeing a new bull market phase underway, in the beginning stages.

In looking at multiple other indicators, I have nothing to tell me to remain in G-Fund.  I have looked, trust me.   Everything that I use tells me to return to stocks.   As such, I am returning to stocks, via 100% S-Fund.

Thank you and Happy Thanksgiving

-Bill Pritchard

Good Afternoon Folks

Hope all is well…today is Nov-19, and we are approaching the customary two-week mark after my last update on Nov-8.  Time to push out a new update in light of the Thanksgiving Holiday coming up.  Note that this is my first post-election post.

First (or BLUF as some would say), I remain 100% G-Fund.  I have received some “inquiries” (nice way of saying it…) as to my logic, in light of a pretty strong rally post-election, so maybe on today’s post I can explain things a little bit more.

The reader may recall my pre-election analysis, and my accurate and correct prediction that Donald Trump (DT) would win the election, a prediction which was published on Nov-8 at approximately 10:39 PM Central Time, and “against the odds” as reported by polls and major media outlets, who prophesied that Hillary would win.   As DT scored wins during the night, the Dow Jones Futures plummeted and Miley Cyrus sobbed.  Note that since Nov-2, I had been tucked safely into bed via the G-Fund.  Let’s take a look at the charts after the election:

While we saw a pretty big rally the days after the election, things kind of subsided a few days afterwards, with volume declining.   Note that a 1.7% Daily Gain or greater, on above average volume, is needed, on the broader market indexes (Dow Jones, SP 500, NASDAQ), to really change the direction of the markets.  We did indeed have above average volume, but we did not have the 1.7% gain.  Also, my benchmark “market health” index, the SP 500, is basically in the same place today as it was in August, aka the 2180 area.   See chart:

With all of that said, one may conclude I need to be more positive and embrace the Christmas Spirit, and wish for TSP cheer this holiday season.   Fear not, as I have plenty of reason to do so:   With DT elected, we have the potential for reduced regulation in all aspects of life, which will help business growth and expansion.   DT is apparently surrounding himself with folks with very strong resumes, and may be a subscriber to the “surround yourself with smart people, and turn them loose” theory of management.  With a Republican President, a Republican Congress, and some new agency heads being ex-Congressmen, one would think we can finally get something done in Washington.

Note that the stocks that rallied after the election were mostly all Dow Jones index components, I called this the “Trump Index” because everything else was flat.   The industries that rallied, per Bloomberg, are evident in this graphic:

The currently top sub-sector of the market is the Small Cap stocks, aka S-Fund, which indeed zoomed higher so far, since Nov-8.  However this is the same index that can crash hardest, if this rally is short-lived.   For those who are in the S-Fund, congratulations to some well deserved gains.   However, in my opinion, caution is the word of the day, as DT chooses his team and the market digests the new administration, which does not even begin until Jan 2017.  In other words, if the market is beginning to tick upward now, we may have a great next four-years.

I am closely monitoring the SP 500, I want to see a close price of above 2190, and I want volume to get a little stronger.    See chart:

2190 is an important resistance level, the good thing is, is that I think we can breach it soon.  If that occurs, and if volume starts to pick up, I will likely exit the G-Fund and return to stock funds.  Until the market itself tells me otherwise, I will remain in G-Fund.  Expect light trading volume next week due to the holiday, market will likely be flat.  FYI

That is all I have for now, Happy Thanksgiving and safe travels !

-Bill Pritchard

Good Evening

My crystal ball at 10:30 PM Central Time on 11-08 is predicting a Donald Trump win for our next President.  This is due to:

1. Hillary narrowly won Virginia, with 48% versus Donald 46%.   I consider this narrow because Hillary’s VP, Tim Kaine, is former mayor of Richmond, the capital, is a former Governor of the State, and a former US Congressman from the State.   You would think that Virginia would have been a “done deal” for her yet DT almost snatched it from her.  I consider this important as it likely represents the sentiment nationwide, regarding a desire for change.  If he can almost take Virginia, he can own most anything else.
2. Donald is on track to win Florida, yes narrowly but in light of all of Donald’s tough talk on immigration policies and the anti-DT energy by the Latino community, this is commendable that he was able to seize Florida.  Again, if he can “pull this off” then his power has previously underestimated.  Note:  not declared official win yet.
3. North Carolina and Ohio, believed to be critical for Hillary, just went DT.
4. He is pulling this off by himself.  Hillary has Obama and ex-POTUS Bill Clinton (basically two Presidents) on her team who have been out cheerleading for her.  Yet DT is still able to perform.

In sum:  I anticipate Donald Trump as our next US President.   The overnight futures markets (we saw financial markets celebrate a no-criminal prosecution on Hillary a few days ago) reacted violently, with Dow Jones Futures moving down 600 points.  The world financial markets are clearly worried by a DT victory, and his strong stances on various issues.   See chart:

Recall that on Nov-2, I posted my TSP change over to G-Fund, out of an abundance of caution.   Six days later, we are in an election where the “underdog” has (so far) knocked it out of the park.   Additional volatility is expected, as is a possible last minute surprise Hillary comeback, although I doubt it.   Again, my move to G-Fund was out of caution, and dare I say it,  I am rarely wrong or incorrect with market calls.  Here we are, yet again, with storm clouds and heavy rain looming ahead, and I sought shelter early.

There are other TSP analysis sites out there, both free and paid, my opinion is those sites have been very reckless and irresponsible advocating anything but G-Fund in such a volatile period, with obvious market signals of a downtrend.  Maybe obvious to me, but not them.  “It is just a paper loss” is only heard when they lose money, however when the same sites magically cause a gain to happen [even a broken clock is correct twice a day], you never hear that it was a “paper gain.”  No, that is never heard.   We have a lot of smart subscribers here, many who have been with me for years, use your sound judgement when you come across those other sites and snake oil salesmen.

Will the markets come back ?  Sure, they “always do” as many like to say, many even remind me this.   “Always do” however carries an unknown timeline to it.  They may come back next week, or next year.  I am unwilling to catch falling knives or ride in cars that are flying off cliffs.

I remain 100% G-Fund until further notice.  Thanks for reading !

-Bill Pritchard

Hello Everybody

If there is any doubt what candidate the markets favor, that doubt was cleared up on Monday Nov-7, when all indexes rallied strong, with the often watched Dow Jones Index gaining 371 points.   However volume was lackluster and this was indicative that institutional investors were not behind the Nov-7 rally, and instead it was “dumb money” versus “smart money” at work today.  Lets look at some SP 500 charts:

Apparent is that the volume was lower than the prior trading day volume (that day would be Nov-4), also apparent is the volume was noticeably less than the heavier “sell off” days of Oct-27, 28, Nov-1, 2.  Such sell-offs basically need same, or greater, volume, combined with a gain in the index, to “overcome” those prior down days.  None of that occurred today.   As evidenced by the below chart, the SP 500 is in a downward “channel“, based on deteriorating price action causing the trend to slope downward, this channel is determined by taking recent highs and recent lows and establishing trendlines:

The SP 500 is basically operating with a sloping overhead resistance line of 2150, and a sloping support line of 2070, it is bouncing within the confines of this channel like a pinball.  A break-thru of these lines, combined with high volume, is indicative of a probable continued move in that direction.

In summary:  A rally such as today is always welcome.  However further inspection reveals not all is what the cover of the book would lead you to believe.

I remain 100% G-Fund until further notice.   Thanks for reading and talk to you soon.

-Bill Pritchard

Hello (Nervous) Readers

I know it is time for an update when my page views hit record levels, the count has increased every day as we get closer to the election, as has my inability to sleep and an increase in blood pressure.  I have said before, if you can’t sleep at night because of your investments, you need to “sell until you reach the sleeping point.”  With that said, my personal stock choices have really done well, they are a few technology names which I will not mention here but I am quite happy with.  I can also have them go to zero (while not desired…) and still pay my mortgage, so it is “hobby money.”   Our TSP accounts, however, are critical, for retirement income and peace of mind, and we cannot roll the dice with those.   So as my former Supervisor liked to say, BLUF (Bottom Line Up Front), I am moving my TSP to 100 % G-Fund, both Contribution Allocations and Interfund Transfer.  Note that per the TSP Website, changes made on the TSP website or the ThriftLine before 12 noon Eastern time are generally processed on that business day.  Requests made after 12 noon Eastern time are generally processed the next business day.  In short, any change made on Thursday Nov-3 should be fully processed by close of business Monday Nov-7.  The election is Nov-8.

Allow me to discuss my views of the markets and shed some light into my decision.   We are arguably in one of the most important elections in history, and clearly the broader markets, worldwide, are nervous.  No matter what party the voter identifies with, or what candidate he/she favors, everyone agrees that this election is important, due to a variety of domestic and international issues not seen before.  Gold Prices have recently ticked upward, which is consistent with “safe haven money flows” as major institutional investors exit equity/stock positions and seek “safe haven” for their money.   Not everyone is moving to Gold, some are moving to other investments, investments which are not really possible to determine but there is no question that major investors are exiting stocks.   As we know, “stocks” for TSP purposes are the C/S/I/some portion of L-Funds.    This movement out of stocks creates additional supply of shares on the markets, and thus pushes prices down, as at the end of the day, the stock market is an auction market, and it is supply and demand driven.  Yes, “earnings moves stocks” but earnings (good or bad) actually cause people to buy or sell stocks, and that action is what moves stock prices.   But lets not get tripped up over semantics here.   Visual explanations are always a good thing, so lets look at the SP-5oo Index charts:

Evident in the above charts, is increased selling and downward trending action which began on Oct-25.   This is the same date that some additional news associated to the Presidential race/election was released.  Also evident is the index broke below its previously discussed 2120 level, and is now below lows established in mid-September.  Since Oct-25, we have seen above average selling/distribution volume on the SP-500 Index, with a distribution day count of 8.   Lets take a look at a chart of Gold Futures, you will see the sudden price uptick, commencing in late October.

Note that 4 to 7 Distribution Days in the stock indexes are enough to trigger concern, and any exceedence of that count (like now) is cause to ask “OK, why should I remain in stocks?”

As such, with a pretty major catalyst (political change, see my FAQ #6) in the works, an elevated distribution day count, and inflows to Gold (as demonstrated by its rising price), I will sleep much better right now if I move 100% G-Fund.

After the elections, stability may return to the markets, and I may return back to the stock funds.   Any triple-digit gains the morning after elections (please don’t email me and lambast me about “missed gains”)-  be careful and don’t count your chickens before they hatch, the markets have a unique ability to trick the investor into doing something he may regret.   I am going to step back, monitor the situation, and will not return to stock funds unless I am comfortable.

All my opinion, and subject to being wrong, but right now I would like to catch up on some missed sleep.   Thanks for reading and talk to you after the election !

-Bill Pritchard