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Hello Folks

Hope everyone is doing well.  The last few weeks in the markets have been rather unexciting.  It seems that our SP 500 uptrend has paused, after making yet another All Time High on March 7, hitting 1883.67.  It then fell into a trading range between basically 1840 and 1880 since that date.   This back and forth trading has been on below average volume, indicating a lack of conviction by the market in any certain direction, not up, and not down.  With that said, 1840 is a level we do not want to go below.  Let’s take a look at the SP 500 chart, one with no comments and one with:

One item of interest, and possible explanation of the prior low volumes (remember we must react to the market itself, and avoid playing crystal ball or over-analyzing the “why”), is the Russian/Ukraine situation, which began late February but has dragged on until present.   Another item of interest was the March 19 speech by Federal Reserve Chair Janet Yellen, in which her remarks appear to indicate a hike in interest rates by Spring 2015.  One should observe that this was her first speech, so any remarks must be taken with a grain of salt, as the original intent of the message may have missed its mark or otherwise lost.

Overnight March 19 SP 500 futures did not drop precipitously…they did come down somewhat but nothing crazy, and did not trade lower than the prior trading session.  See chart:

March 20 daytime market trading may be lower on the indexes due to the Yellen speech, but I think this will be digested quickly and the markets will (hopefully) return into an uptrend in the next week or two.

I would not be surprised if rates do go up, as our economy continues to recover and improve.  My own “sector”, aviation, is seeing a rebound in aircraft orders and sales, both from a private aviation standpoint and commercial / airliner standpoint.   Aviation is very sensitive to the economy (all though an airline is very hard to “kill”), as the slightest increase in expenses coupled with the slightest decrease in corporate earnings, results in the shareholders ordering the corporate jet to be sold.   My point is, when you see aviation improving, that is a good barometer for the economy.   I think we are “past” the worry and uncertainty about rising interest rates, most market players have accepted that it will happen, and I feel that this is mostly “priced into” the market at this point, temporary market drops or hiccups aside.

I had a reader e-mail me a good question recently, allow me to answer a paraphrased version here, as these posts/updates get much better viewership than my FAQ page gets:

Q:  Why do you use the SP 500 index to gage the market’s health if the S-Fund (which you are invested in) is small cap stocks versus SP 500 large cap stocks ?

A:  That is a great question.  The SP 500 is my overall, general purpose, market-health indicator, as America’s largest companies are members of that index.   When 500 of corporate America’s largest company stocks, many of which typically have exposure internationally also, are performing well, it is a better indicator than the Dow Jones Index (only 30 companies) or the NASDAQ (largely tech related companies or small cap stocks).  With that said, I do cross-compare the various funds and analyze each fund’s health at any given time of the week, month, and/or quarter.  However, of all the indexes, I have found the SP 500 to be the best indicator regarding stock market health.

With that said, the S-Fund continues to be the top performer, the C-Fund is next, and the I-Fund is last, largely due to its international nature and various pockets of tension and worry flaring up around the globe and thus affecting the I-Fund’s performance.

My current TSP Allocation remains 100% S-Fund.  In addition, I see no “red flags” in the market’s recent past behavior.   This of course can change.   Indeed, some concern and worry exists regarding Ms. Yellen’s remarks and some tension around the globe.   However I feel we will overcome this and I am optimistic the uptrend will resume.

Thank you for reading.   Thank you for the great emails and requests, ideas, etc on what material is more important to the audience versus not important.  Some of my charts and lingo can sound like Greek, yes I know.  This site is for you and I seek to continue to improve the site material, and increase the   subscriber base and viewership.  It is pretty cool when you travel away from your home-base, and meet other professional colleagues, who ask “are you the same guy” with “that TSP site we all follow.”   What a great vote of confidence, hearing things like that.  Thank You.

If you find this site informative, please share it with your friends and coworkers.

Talk to you soon…

– Bill Pritchard

Good Evening everyone

February is now behind us, and the month was clearly a positive one.  This was a welcome breath of fresh air, after having put January, a negative month, to rest.  I might add that per TSP site data, January ended up being a negative month across all the stock funds, and most of the bleeding occurred in the later portion of the month.   During the first week of February, support on the SP 500 Index was found at the 1740 area, and then a weak uptrend began, on low volume.

As discussed in numerous prior posts, volume is the “horsepower behind the move” and can also be associated to “the credibility of the move”, and high volume is much more credible than low volume.  During the first week of February, the index trickled up, then went flat, from Feb 14 to Feb 23, trading around the 1835 area.   Lets take a look at some charts, first is unmarked, second is marked:

As can be seen on the charts, we had lackluster volume (and thus I was not eager to “jump in with both feet” quite yet) during the first week of February, then some flat action, then on Feb 24, a very strong “up” day with the SP 500 Index making a new All Time High.   This was discussed in my Feb 25 blog post, and a few days later, the national news media “experts” decided that they too, would report on it.

As we enter March, we have had some international events throw water onto the market’s fire, with the I-Fund being (not shockingly) hit the worst, due to it’s international nature.   These events were primarily the Russian military action in Ukraine.   The indexes were hit hard, and the Dow was down triple digits after Russian actions on March 3, which also happened to be a Monday for US markets.  Mondays are not a good day, market-wise, to have one country invade another country.   However, on the big picture scale (and why I did not panic) is that neither country was a huge economic engine or financial powerhouse.   Russia invading Ukraine (in my view) is akin to Venezuela invading Aruba.  Not a total surprise was that on March 4, the markets were up huge, with the Dow up 227 points, in a quick one-day reversal of investor sentiment towards the Russia/Ukraine situation.

I continue to be 100% S-Fund, however will add that C-Fund is doing well also.   The I-Fund (as discussed before) is an excellent investment vehicle, and in the past, has put great returns on the table, but it is more volatile and sensitive to international events.  Me personally, if I-Fund is only slightly outperforming S/C-Fund, I am probably going to just go with the domestic S/C-Funds.

Before I close out, thank you for the numerous emails and compliments.  

“Thanks for giving us some insight into the many fund choices and market’s behavior.  While I do not follow your moves 100% exactly, I enjoy your site, and no longer have to play Pin the Tale on the Donkey and try to guess which fund out of ten choices is the one to be in.   Thanks.”

With that said, lets take a look at some quotes from Paul Tudor Jones, a very successful hedge fund manager and trend follower.  Trend following is a practice that I use for my own investing, both TSP and in my personal account.   Allow me to cut and paste some of his quotes:

“If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.”
Paul Tudor Jones

“Don’t focus on making money; focus on protecting what you have.”
Paul Tudor Jones

Sound familiar ?    Have you heard a similar philosophy here ?

Thanks for reading and please share my site with your friends and colleagues.

– Bill Pritchard

Hello Folks

Thank you for the numerous emails and inquiries if I was alive.  I am indeed alive, however I was on a recent 6-week TDY detail and mostly out of touch.  I am still trying to recover, and am using music therapy to stay awake and post this…

With that said, I am returning to 100% S-Fund.   The SP 500 index in February ticked upward, indeed, however this was on less than average volume.  That type of volume aka “less than enthusiastic volume” is reflective of an uptrend which can collapse and reverse.   Remember, volume is the “horsepower” behind the move.   Today, Feb-24, the SP 500 reached 1858.71, a new All-Time-High (ATH), on above average volume.   Readers may recall via past postings that I am very fond of the All-Time-High and above average volume, as this is a solid indicator.

Lets take a look at some charts, first with no comments, second with comments:

As you can see, the 1850 level represented overhead resistance and a barrier to continued progress, however today, the market (not me, or other “experts”) itself decided that it indeed was in a new uptrend and powered thru the 1850 level on above average volume.   This is when opinion, theory, emotion, etc should be set aside and the investor respond to the market itself.

Thank you for reading everybody, talk to you soon.  Please share this post and my website with your colleagues and coworkers, and tell them I am back from TDY and still alive….

– Bill Pritchard

Hello folks

The last week of January is over, and the month was down, instead of up, in large part to the sell off which started in the last two weeks of January.   The first trading day of February, Feb 3, is over, and it was not pretty, with the markets closing hard down and the Dow Jones Index loosing over 300 points by end of day.  All indexes and sectors got creamed, large cap, small cap, international, nothing was immune.

With the month of January now behind us, I am able to review the behavior of the SP 500 index (my “go to” index for assessing market behavior) and I have observed a possible Head and Shoulders Pattern developing.  This pattern, if it occurs within the structure of a topping bull market, can be a very reliable indicator of a pending trend reversal.   While no hard, set-in-stone, rules exist defining this pattern, it is generally accepted to be composed of a left shoulder, a head, and a right shoulder, with all of the above sitting on a “neckline.”   The neckline currently is 1770 on the SP 500.   NOTE:  Due to evening data issues, charts on this update do not account for today’s action (it does not make a difference, today was down, not up).  A picture-perfect head and shoulders pattern (H/S) should be 5 (five) months or longer in length, from left shoulder, thru the head, to the right shoulder, and the left shoulder and right shoulder typically, but not always, similar in size.    Let’s take a look, see images and comments on the images:

Same image, with comments:

As can be seen, this pattern (which is not complete, the right shoulder is yet to be fully developed yet, we are too early in my opinion….) began to form on/about Nov 11, 2013.   The 5 (five) month completion point will occur on/about April 11, 2014.  Dates are approximate and as stated above, no hard rules exist for these patterns, because behind the pattern, is human behavior, which causes the pattern.    With that said, the current left shoulder is six weeks long, the head is six weeks long, and the right shoulder began approx Jan 27, 2014.  Again, the sizes do not have to be identical.  The volume on this possible H/S pattern on does not meet the picture-perfect H/S volume criteria, likely due to some holidays in each of the last three months and reduced trading activity.

After the formation of the right shoulder, the “neckline” then gets violated to the downside (current still-being-formed neckline of 1770 was broken today Feb 3).  Typically the market will rally back up to the neckline, and break down again, usually on huge volume, thus commencing a new downtrend and bear market.  “False rallies” back up to the neckline will catch the uninformed and unwary, who blindly return to stocks, because the market “is coming back”, not knowing of the bloodbath lurking around the corner.

If this pattern continues to develop into a correctly formed H/S, we will see flatness and lack of uptrend for the next few weeks, and then a break downward, thus commencing a new downtrend.  I am personally 100% in G-Fund, and captured the gains of Jan 30, 2014 on my way out the door, due to the two-day processing time for TSP change requests.  My opinion is, I don’t know if I would be remaining in stock investments “just a little longer” in order to “see what happens”.  Or “I am already down, might as well stay where I am at, no sense getting out now.”  Let me put it to you this way, you are on a raid, and in the hallway, you take two rounds to your raid vest.   And all indications are that the bullets are not going to stop coming.  You gonna stay in the hallway, because “you already took two rounds” ?    Didn’t think so.

Taking a look at January, it can be seen that the index is still below the 50-day Moving Average, which is a commonly used trend indicator used by technical analysts and money managers.  The index has gone below the 50-day in the past, during June, Aug, and October, but this time the January volume has been much higher than the prior 50-day violations.  Let’s take a look:

Red circles indicate points of 50-day violation with attention called to volume on bottom of chart:

As can be seen, January’s volume definitely increased and was higher than prior occasions when the 50-day was violated to the downside.   Volume is the “horsepower behind the move”, and any move up or down accompanied by high volume is highly credible.  In other words, if something goes up or down on high volume, then the probability is high that it will continue to go up or down.

Let’s move to another topic, the January Barometer.  As can be expected, some media outlets are bashing this indicator as being unreliable.  I don’t know what to tell you, I mean, you gotta make your own decisions on what or who to believe.  The developers of this indicator publish the Stock Market Almanac, I have purchased their products and dealt with the company, always had a positive experience.  Nobody has a perfect crystal ball obviously, but I am a believer in their products and studies.  Reliable, credible data reflects that the January Barometer is valid to the point that it should at least be a part of your toolbox.   The market itself, is the ultimate signal, but I use some supplementals to assist me and the January Barometer is one of them.   The theory behind the January barometer is that it “sets the tone” for the rest of the year.   Anybody who watched the Super Bowl, probably said “wow, great start Broncos” as this picture unfolded (I know I did…) :

So are we to believe the January Barometer?  You tell me.  Worst January since 2012, and a very bad first day of February, and this behavior (remember, behind market moves, are people…) in the markets is just, not important ?  Means nothing ?   Was the “tone set” for the Broncos from the beginning ?   A fairly basic action (a snap), in the earliest stages of the most important game of the year, bungled ?   How much  did Denver rehearse for this game ?  Denver has been to the Super Bowl before, they know the drill.   Is there any linkage between this being bungled, early in football’s most important game, to their huge loss to Seattle ?   Did Denver “get started on the right foot” Etc ?   Did this fuel or de-fuel Seattle’s already powerful confidence?  In summary, you must form your own opinion on the January Barometer, which for me is a supplemental indicator to the primary signal, the market itself.

Having called everyone’s attention to the prior 50-day Moving Average violations, and my observation that the volume during January’s violation was much higher than on prior occasions, it is important to note that making headlines is the fact that the SP 500 recently had the longest weekly drop since 2012.

In summary, January was a difficult month, and far worse than any month going back to 2012.   The first trading day of February was a disaster.  Let’s see how February shapes up and hope the storm clouds clear up.

Due to my analysis and observations, and opinion that a new downtrend and possible bear market may be underway, all of which was discussed in my Jan 29 2014 posting, my TSP Allocation is 100% G-Fund.   My preliminary review of similar TSP websites (many of which are paid membership sites of $150 or more annually) tells me that The Fed Trader has been the first, and currently, is the only site, which has provided timely forewarning of a possible downtrend.   Folks have to be careful who to trust.  If you can figure out the ownership behind many of these sites, typically associated to PO BOX’s and mysterious LLC’s, good for you.  Here, I sign everything with my name, and if that is not enough, folks have my email and picture, in the event they go bankrupt or their TSP goes to zero based on my market analysis.  Many in the audience know me or know someone who knows me, and can track me down to vent in person.  Here, I believe in transparency and plain, easy to understand analysis, that my audience can relate to.  Advice of the opposite type is common and they even made a movie about it.  Just a heads-up as in the coming weeks, confusion and misinformation will be pumped out by the media outlets, investment websites, and major brokerages.

Talk to everybody soon, and thanks for reading………. – Bill Pritchard

Good Evening

Despite my personal opinion that the US economy is improving and we are entering healthier financial situations, both at the individual/personal level and also at the corporate, government, and political levels, the market continues to challenge my sanity and ability to sleep at night.    It appears that this is associated to emerging market fears, a downturn in China manufacturing (who manufactures goods for the US), and the QE reduction.   But at the end of the day, I react to the market itself.

Today, it traded lower on increased volume, reflecting yet another Distribution Day within a span of a few weeks.   In addition, the SP 500 has made no progress up towards its 50-day Moving Average, instead closing lower today, than it has any other day during the entire month of January.

Observe that the January Barometer, with two days left, basically has no chance of “going positive” for the month and with a 90% accuracy rate (I am happy to have it inaccurate this year, but….), the crystal ball is forewarning a flat or down year.  Yes, I hope I am wrong.

For the above reasons, I am trying to set my emotions and personal convictions aside and respond objectively to the market itself.  Quite frankly, I confess that I am running out of excuses for the market and the reasons to stay in stock funds are nonexistent.  I have a picture of a duck, and I am turning it on its side, flipping it upside down, looking at it with one eye closed, changing the lighting in the room, and I just can’t make the picture not be a duck.

The market may indeed rally up in a few days or display some up days, but in the grand scheme of things, a possible new downtrend is potentially in the works.   If correct, this will take many weeks to form, then typically break hard down, and continue down for multiple months or longer.  Tonight, I submitted a request to change my TSP Allocation to reflect 100% G-Fund.  Please see FAQ #10 regarding exactly what I do when I make a change to my TSP Allocation.

This allocation change will prevent further account damage and in the event of a severe stock market break downward, those in G-Fund will be protected.    The FAQ on this free site discusses my investing strategy, I have had some new subscribers (thank you for signing up) asking me multiple questions, most of it is answered on the FAQ.

Please be familiar with the disclaimer section and that how your manage your TSP is up to you.   I think everybody “gets it”, so with legalese aside, I am moving to 100% G-Fund.

Thanks guys, talk to you soon…

– Bill Pritchard

Hello everyone

Today’s Jan-28 stock market action resulted in the SP 500 index trading above yesterday’s range, and on (slightly) above average volume.   This is a positive development, and a desired change in the water temperature after multiple days of losses.  It closed above 1790, which is a level that I believe to be important, and closed at 1792.50.   The next level I am watching is 1806, as that is the 50-day Moving Average of the SP 500 index, any close above that, and we can all breathe somewhat easier.  In light of AAPL’s poor performance, the indexes displayed complimentary strength.  Overnight markets in Asia (open while America is closed) are trading positively, which is a good sign.

As most know, tonight was the State of the Union Address, and the discussion was basically about jobs (job creation, training, education) and energy (move automobiles to natural gas versus gasoline and discussed pro-solar energy stance).   My December 10 post discussed the importance of jobs, under Point #4.  Clearly the President’s economic team has advised him of the importance of jobs, and this announcement is not a surprise to me, as we also have the QE reduction in effect, and the FOMC meeting which concludes tomorrow, Wednesday.   So a few economic policy items are in motion and magically on the first State of the Union address of 2014, we hear about jobs.  No, I am not going to claim that I predicted this announcement regarding the importance of jobs, but you heard it discussed on The Fed Trader before our President mentioned it…

Moving forward, lets take a look at a snapshot of tonight’s intra-day SP 500 futures approximately ten minutes before the President began speaking.   As you can see, they ticked upward leading up to the speech:

Now, lets take a look at the same chart, at the end of the President’s speech:

What is clear is that the SP 500 futures went upward, an apparent positive response to the President’s speech.  Evening futures typically act as a preview to the upcoming daytime market trading’s behavior.

Summary:   Today’s stock markets traded up, and could have traded higher had they not been dragged down by AAPL.   State of Union address discussed many things but jobs appeared to be hot topic.   SP 500 futures, trading during evening, displayed positive reaction to the President’s speech.   Evening Asian markets are positive.  “Next goal” for SP 500 is close above 1806.

My TSP Allocation remains 50% S-Fund and 50% C-Fund.

– Bill Pritchard

Good Evening

I apologize for the chimes on your Blackberry as you receive this update, late at night, however I felt it was important to send this update out.   Please note, my TSP Allocation has not changed, yet.  With that said, today the SP 500 indeed penetrated downward thru the 1790 level, which was the low of the previous session, reflecting a continued downtrend of price action.   Fortunately, volume was lower than the prior trading day, which serves to temper my concerns, somewhat.  After hours, the Dow Futures and SP 500 futures were trading up, having found support and not trading below the day session’s lows as of 1AM Eastern Time.   See charts:

This act of resilience by the indexes provides me with some optimism that the markets will not go down without a fight, and I am not changing my current TSP Allocation (not yet). Observe my prior post, in which I discussed that perceived problems in Argentina and international markets have caused some panic selling by institutional investors.  In addition, it appears China is having some issues, combine this with the FOMC meeting this week, and the unknown statements on Tuesday’s State of the Union address, and it appears the markets are overly nervous.

NOT good, is that Apple Computer stock dropped 8% in after hours trading, due to disappointing sales and revenue outlooks.   This is a huge drop, as Apple is a large-cap stock, and a member of the NASDAQ 100.   You can fully expect that the market action on Jan 28 will be dragged down by AAPL.

No matter what happens this week, it will take a miracle to kick the month into a “positive month” in which we have a positive, and not a negative, percentage return.  With that said, if you subscribe to the January Barometer theory, as I do, the calendar year is not looking good for trading.   That may be reason alone to reduce exposure to stock funds and move partially to the G-Fund, as this is based on documented historical data, not hocus pocus or complicated economic theories.

Next up this week is the FOMC meeting, State of the Union address, and observing how the market absorbs the AAPL news.

My TSP Allocation remains 50% S-Fund and 50% C-Fund.

– Bill Pritchard

Good Evening

Last week was not pretty in the markets, US indexes and the international indexes witnessed severe losses on above average volume.  This is reflective of institutional selling, which is clearly a “red flag” and reason to moving the trigger finger closer to the G-Fund.   The sell-off in the markets appears to be attributed to financial problems in Argentina, in which inflation rates of over 30%, currency valuation issues, and low currency reserves, have prompted fears for international markets.   The worst performing markets last week were Argentina, France, and Germany.   Not surprisingly, the I-Fund was hit hardest last week, C-Fund next worse (#2 place on the worst list), and S-Fund being hit but escaping with the least damage.

Some fear that Argentina, running out of currency reserves (have we seen this show before?) , may default on current debt obligations, which will impact the lenders and impact credit ratings.  Seeing this, institutional investors likely got nervous and bailed out of other emerging and international markets.   The problems started Thursday, and continued into Friday.

My analysis of this, is that this was “panic selling” akin to when someone yells “Fire” in a movie theater.  Nobody is sticking around to analyze the fire, or how fast it is spreading.   People are just hitting the exits, and will look back once they get outside.   With that said, it is my opinion that institutional money bailed out on Thursday, and on Friday, they continued to hit the exits because they did not want any surprises over the weekend.  They could “rest easy” over the weekend, knowing that they had liquidated positions and were out.   Hopefully, on Monday Jan 27, people will reassess things and decide that Thursday and Friday were overreactions based on fear and not fact.   The following observations prompt me to believe that the US economy is back on track and things structurally are improving, home in the USA.  These are all available via google search, I have assembled some of them here:

1.  2013 home sales numbers higher than any year since 2006

2. Improving labor market evidenced by reduction in jobless claims data

3. Lower foreclosure rates (admittedly this may not mean anything, most foreclosures were related to 5-year ARM mortgages, and the peak of the housing cycle was approximately late 2007, more than 5 years ago.)  In other words, the “real estate boom foreclosure” cycle is behind us, if using the 5-year ARM as a reference point

4. Record new car sales numbers in 2013

5.  Record numbers of airline travelers, and airlines ordering record numbers of new airplanes, and hiring pilots.

6.  Gold prices in a downtrend, which began in late 2012.   “Safe haven” investment of gold loses favor in good economic climates as investors pull their money out of gold seeking better returns elsewhere, typically in stock markets.

7.  Corporate Earnings, Retail Sales data generally improved in 2013 over 2012.  I say generally because one needs to view this with a grain of salt.  “Sears reports poor earnings” or “Kmart has a bad year” does not necessarily mean that Joe Customer is broke / unemployed / bankrupt and therefore not shopping and stimulating things.  He is possibly one of many customers who are spending their dollars via Amazon.Com or at other stores, and saving gas and not having to park the car.  Just FYI when someone tells you that America is doomed because the local K-mart is empty.   Actually, America may be better off without having to step on gum in the parking lot, walking around a spilled Slurpee in the aisle, and old hot dogs spinning on the warmer, and two out of 10 cash registers staffed, all part of the “shopping experience” I have had myself.

Readers will recall my observations that the I-Fund was performing well in January, but I stated that I wanted to give things a little more time before making any decisions regarding the I-Fund, which (over the last few years) is hyper-sensitive to world political problems and economic concerns.   While we are on the subject of January, the January Barometer is not looking good right now.  Some may recall that this indicator predicts how the markets will perform for the rest of the calendar year, with an accuracy rate of 90%.    Lets take a look at the SP 500 Chart so far, from the start of January until present:

As can be seen, we are currently not “up” in January.   This concerns me, as the January Barometer is a highly accurate predictive indicator for the year to come.  We have five more days of trading left, Jan 27, 28, 29, 30, 31, and January is over, done, El Fin.   We need some miracles this upcoming week because that is what it will take to go from 1790.29 (Jan 24 close), and go above its highest close of 1848.38 (Jan 15), a which means that in one week the SP 500 has to gain 58 points.   Think of this as a football game, and as far as January is concerned, we are in the last quarter.   The markets have to regain some points if the January Barometer is used as a yardstick for the year.  1848 is the key level we are watching, for those CNN/CNBC ticker watchers.   1790 is the key low to watch, anything below that, and a cautionary move to G-Fund is almost obligatory.   Some of the “ride it out, it will come back” fans will surely email me (as they always do) but hey, I know what I am gonna do.   Control the bleeding and seek cover and concealment.

I have no additional charts or graphics this post, I wanted to mostly address what happened Thursday and Friday and provide my analysis.

For now, my TSP Allocation remains 50% S-Fund and 50% C-Fund.
However, I am very close to moving to G-Fund, which I hope does not occur, based on my opinions above regarding the US economy and the reasons the market sold off last week.  Hopefully, calmer minds surface next week and the markets recover.  At the end of the day, the market knows all, and opinion, speculation, theory, do not matter and we must respond to the market itself.    Let’s all be heads up next week as to how things play out.

Thank you for reading….

Bill Pritchard

I apologize….As a follow-up to my post 15 minutes ago, my TSP Allocation remains 50% S-Fund and 50% C-Fund.   BUT 100% S-Fund is fine also, that information should have come out that way in the first message but I hit “publish” too soon.   I need to stop multitasking and trying to send out blackberry PIN messages while I work on this site.

My TSP Allocation:  50% S-Fund and 50% C-Fund.

Good evening folks

Today, Jan 15, was a very good day in the markets, as was yesterday Jan 14.   Monday Jan 13 was pretty dismal, with a large sell off on above average volume.  Jan 13 was clearly a “red flag” day and not something we want to see occur often.  As can be expected, many naysayers and market bears came out taking credit for predicting the “coming crash” etc. nonsense, only to have things rebound the next day.   Aforementioned naysayers then disappeared back into the shadows.  The market continues to turn on a dime from one day to the next, so it is helpful to analyze things not only from a daily view, but zoom out to a weekly-monthly-quarterly view, to get a better snapshot of behavior.  For additional understanding of this, take a look at my March 1 2013 post, regarding “report cards.”

Volume on Jan 14 was above average, with the index closing up for the day, then on Jan 15, volume was even greater than Jan 14 volume, with another close up.   This behavior is consistent with institutional money flowing into stocks, such as money managed by mutual fund managers, hedge funds, retirement programs such as the TSP and state employee pension plans.   This is the money that moves markets and “primes the pump” for continued upward action, so it is critical that we monitor volume and price action in the markets.

With that said, on Jan 15, the SP 500 index (my default index for monitoring the health of the market) had a “Gap Up Day” in which the low price of Jan 15, 1840.25, was higher than the high price of the prior Jan 14 trading day, 1839.26.  This causes a “gap” to appear on the price chart.   This is a very bullish signal, and if the fundamental and economic factors are bullish (they are, things are recovering), this in almost all cases is a “buy signal” or at least a huge vote of confidence for bullish market conditions.    See charts below, one without comments, one with comments:

As a result of the prior two day’s action, my concerns which existed on Jan 13 have subsided to some extent, but not completely.   This is due to the “January Barometer”, a concept developed by Jeffrey Hirsch and discussed in his book The Almanac Investor, of which I have copy (now worn out). The January Barometer, with an accuracy rate of 90%, is an indicator in which every “down January” precedes the rest of the year going down, or flat, for stocks.  An “up January” precedes an up year.   Down or flat is not good, and so far this January has been mostly flat.   We are only two weeks into the month, so lets keep our fingers crossed.   The action on Jan 14 and Jan 15 may be what we need to light the firewood.

Regarding the TSP Funds, the S-Fund and I-Fund are the top performers right now, with the I-Fund outperforming all the other funds (so far) this month.   Before anyone is quick to pull the trigger on fund changes, my opinion is lets allow January to close out and then assess things.  My personal TSP Allocation remains 50% S-Fund and 50% C-Fund.  EDITED on 01-15-14 9PM  

Once again, “thank you” for all the great emails, and please continue to share this site with anyone who will benefit.

Thanks guys

Bill Pritchard