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Good evening….I wanted to update everyone that tonight’s electronic trading of equity indexes (E-Mini SP 500 and E-Mini D0w) have shown significant gains over the prior session.  These are traded worldwide, electronically, and are open for trading beginning Sunday evening, then 24 hours each day, until Friday evening, when they stop trading until Sunday evening.   Sunday behavior is usually good “intel” on how Monday’s regular stock markets will behave.  I have the sick habit of checking them every Sunday night, which determines if I lie awake all night in a cold sweat due to nervousness, or if I sleep soundly with a smile.  Tonight I will have a smile.

E-Mini SP 500 Futures are trading up 17 Points

E-Mini Dow Futures are trading up 162 Points

Lets look at the charts:

As can be seen, both indexes “gapped up” (a concept explained in my last post on this site), indicating strength and bullishness.   Most successful traders believe a “Gap Up” requires the establishment of a long position/buying shares.

Tonight’s activity is likely associated to the news that Larry Summers has withdrawn his name for consideration to be Ben Bernanke’s replacement.  As always, the market itself ultimately serves as the signal for our trading moves, not outside news or trying to crystal ball / predict the market.  

Most of my subscribers should already be “in position” in the S-Fund and/or I-Fund due to my opinions regarding bullish/positive behavior in the indexes, discussed in depth on this website.  If Monday 09-16-2013 stock market activity behaves like tonight’s futures, then those who are “in position” will benefit greatly.

Thank you for reading and let’s see how this week turns out.   I am very optimistic.  As always, if you find www.thefedtrader.com a useful and informative website, please share it with your colleagues and coworkers.  Good Night.

– Bill Pritchard

Hello everyone

To say that the last couple of weeks in the markets have been interesting, is an understatement.   Like most of us, I am glad that August is behind us, leaving us with September as the worst performing month on a historical basis, for market performance.   In plain English, of all the months in the year, stocks do the worst in September.  October is the last of the “bad months” however October also has the reputation of being a month where many new bull markets have started. Coupled with September’s reputation, is the Syria crisis and ongoing concerns over Quantitative Easing (QE) tapering.   Lets talk about some of this stuff.   Before I proceed, allow me to state that I am still 100% S-Fund.

As some of you may recall, in my August 27 post, I discussed how the markets respond to war.  In almost all cases, over history, the markets have entered an UPTREND once bombs get dropped and war is “declared.’”   It should be noted that even on 9-11-2001, the markets went UP after that tragic day.   They then entered a new downtrend, in 2002, due to other reasons not related to the 9-11 attacks.

One thing that I have observed, in the course of trading for the last 20 years, is that markets definitely do not like uncertainty or lack of clarity on important issues.  Whether it be war, economic policy, the outcome of a presidential election, etc., markets do NOT like wishy-washy or uncertain energy in the air.   Once a “stance” is made or a topic becomes more clear, the markets in almost all cases will respond immediately.   Recently, President Obama made public his position regarding Syria, and the markets reacted to this and went up, once the leader of the most powerful nation in the world made his position known.   While the politics and debates regarding the position itself have been argued, the fact that a position was established is what the markets responded to.  And the markets continue to respond to potential progress, facilitated by Russia, a country which is reacting due to the established position expressed by President Obama and Secretary of State Kerry.

Lets take a look at the charts of the SP 500 Index, and how the index performed in relation to its 50-day, 75-day, and 100-day Exponential Moving Averages.   These are moving trend lines that I use as one component of my trading system, to identify turning points and red flags, and determine trend direction.  Recall that while I consider news and economic reports to be important, the ultimate trigger for market decisions is the market itself.

On today’s date, 09-10-13, the SP 500 index traded higher on above average volume, resulting in a “gap day.”   A Gap Day is when that day’s low price, is higher than the previous day’s high price, resulting in a “gap” when displayed on a chart.   Gap-Up-Days are a very reliable bullish indicator and in almost all cases, require the trader to establish a long/buy condition.  The larger the gap, the stronger the move. Gap-Up-Days are signs of strength.  See charts:

50/75/100-Day EMA Charts are below…last chart is a close-up view with comments:

Regarding QE tapering,  it has been said that “good news is now bad news” and “bad news is really good news.”   What does this mean?   First, lets reflect on my previously discussed example of the US economy being a recovering hospital patient, and life support (QE) is no longer needed, due to the patient’s improved health.   The doctors have decided that the patient needs to breathe on his own, and it is time to disconnect life support.   With that concept in mind (and if CNBC starts to use it, you heard it on The Fed Trader first…) , good news that the economy is recovering is “bad news” because it increases the chances that QE will be tapered.   Which, nobody wants, because the QE stimulant drugs are something we are all addicted to.   So its better to have “bad news’” (poor jobs reports, poor economic news, etc.) as this means QE will likely remain unchanged for the foreseeable future.   Clear as mud ?  Does this make any sense ? (no).     But that is what is happening, period, the end.  It is not any more complicated than that.  Just don’t tell the college professors who have authored white papers on the topic or the studies showing bond prices and treasury yields and how they will determine the market’s reaction to QE tapering.   I mean, lets not make this hard folks.   1.  QE exists.  2.  QE will go away at an unknown date.  3.  The market WILL react.  4.  Responding to the market, not trying to predict it, is what we need to focus on.

For a refresher on not overcomplicating things and not trying to over analyze events, see my March 31 post on this site.   A few college professors might take a look at it, which could be titled “You don’t need to be a meteorologist to know when to use an umbrella.”

Based on my observations associated to the charts and other indicators, I believe the markets have resumed their uptrend.  My friends at Investors Business Daily newspaper announced this yesterday, on 09-09-13, but allow me to pat myself on the back and state that I was ahead of them already and never left the S-Fund.  My opinion was the uptrend never really stopped, just had some struggles in August.   At the present time, the I-Fund has outperformed the S-Fund based on a two-week “look back” basis, and may possibly continue to outperform the S-Fund.   Due to some global turbulence, I prefer to be in S-Fund for now, but if you can tolerate some volatility, my opinion is that 50% I-Fund and 50% S-Fund would be a good combination.    Me personally, I am still 100% S-Fund.

Please note that we have the rest of September to drive thru, then October, before the “worst market months” label no longer applies.   In other words, expect some turbulence and speed bumps in the road until we clear October.   With that said, any signs of life and new uptrends established in the worst market months, are great news, and I can only imagine how the markets will do once we get past October.

As always, THANK YOU for reading, and please share this site with your coworkers and colleagues.   Thanks again

– Bill P.

http://www.thefedtrader.com/

I wanted to update everyone that Mr. Dan Jamison has released an updated FERS Guide, edition 7.3, released on August 19, 2013.   Every federal employee should have a copy.   If you need retirement or benefits information, he is the “go-to guy” for that.

I feel fortunate to be able to reach out to Dan, to answer benefits questions that sometimes come across my desk.  I am also proud of the fact that my site, The Fed Trader , is mentioned in the FERS Guide.

Dan will present a 90-minute session at the 2013 FLEOA National Convention, in case anyone wants to meet him.  All material in the FERS Guide is written and produced entirely by Dan.   Please use the “FERS Guide” page on this site to locate the recent editions.   Thank You.

– Bill Pritchard

Hello everyone

Today witnessed the market’s response to possible military strikes on Syria.  As is typical when people respond in an emotional, panic-like state, their response is sometime without the benefit or consideration of planning or study.  As they say, hindsight is always 20/20.  Lets use some of this hindsight and take a look at war and markets.

Allow me to display two charts of the SP 500, one showing the 1991 time period (US military planes attacked Baghdad on Jan 17 1991), and another one showing the 2003 time period (US military forces launched attacks on March 19 2003).    I was unable to bring up charts prior to 1991 (such as WW-II, Vietnam, etc) but in summary, previous research has demonstrated that stock markets commonly rally, when the US gets involved in military conflicts.  It can be further said that prior to US invasions, markets are typically in panic mode and/or declining.

Flash forward to 2013, and a strike on Syria is being mentioned on the news.  Syria is akin to Iraq in many ways.   Banned devices/materials.  Civilian population being attacked by their own military.  Middle East country.   No identifiable useful export besides the mass production of problems and headaches.   Same song, same dance, the only thing different is who is on the dance floor.

How do we respond to the sell-off on Aug 27 ?  That is probably the “question of the day.”   Please see attached charts.   In light of my jumped-the-gun response regarding North Korea, in which I went to G-Fund, only to see the markets then go up, I am going to “hold position” in S-Fund right now.  The North Korea situation was the threat of nuclear strike against the US, and in the absence of market data regarding strikes against US soil by other countries, I elected to move to G-Fund.    No harm/no foul, but I must admit I got nervous and moved to G-Fund.

Starting to ramble…long story short, see charts….personally I am staying in S-Fund for the time being, and trying to keep emotions and nervousness away from my decision-making.

Thank you for reading.  If you find this site useful or informative, please share it with your friends and coworkers.  My TSP Allocation remains 100% S-Fund but obviously this is subject to change.

– Bill Pritchard

Hello everyone

After the past week’s disappointing market action, I have decided that chewable Pepto Bismol is much better than the liquid version.   With that said, the indexes are showing weakness and we need to keep our trigger fingers close to the G-Fund trigger guard.   I am not moving yet, but I am closely monitoring the moving averages and trend lines.  One intermediate Moving Average that I use is the 75-day, any activity below this is almost a sure red flag and G-Fund signal.   See charts below, one without comments, one with comments.  The 75-day moving average is the red line.  This is used in conjunction with other data, however it’s usefulness becomes apparent by looking at the charts.

As you can see, we had some prior weakness occur in late June, however the market recovered and things rebounded.  As we enter August, we are yet again seeing some lack of headway.   It should be noted, that historically, August, September, and October, are the market’s worst performing months.  So, what does this mean ?   This means we are faced with the questions:  Should we disregard this poor August performance, and consider it “ops normal”, and continue forward in stock funds ?   Or should we consider this the end of the world and go to G-Fund ?    Due to my inability to predict the future, I am forced to utilize my charts, historical market notes and experience, and mathematical models to make decisions.  Cable business news shows will spend all of their broadcast day trying to answer the same questions.

In summary, one thing is for certain, the markets are displaying weakness, and a move to G-Fund may be in the near future.   Let’s see how this week plays out.

Thanks for reading and please share this site with your friends and coworkers.

– Bill Pritchard

Hello everyone

The market’s action this past week resulted in the streak of gains (six weeks worth) being paused.  This is not a big deal…July historically tends to be a lethargic trading month in the markets…our July 2013 gains were really a pleasant surprise.   Hence, this “pause” in the market’s uptrend is not causing me to lose sleep.

It is noteworthy to reflect that July’s gains (again, typically a lackluster month) resulted in the S-Fund being the top performer for the month, something I talked about in my July 26 post on this site.

It should also be noted that the I-Fund has indeed taken the lead over the other funds, a behavior which began approximately the last week of July and exists until now.  I am not going to change my TSP allocations yet, as I want to monitor this behavior a little longer, but it is something that we need to be cognizant of.   One could speculate as to why this is happening…some folks believe that the global economy is starting to strengthen, thus prompting some cautious investments in the foreign markets, and thus pushing the foreign stocks higher. 

The most recent trading week, August 5-9, was marked with some nervousness after Chicago Fed President Charles Evans’ Aug 6 comments, which signaled a possible scale-back of the Fed’s financial stimulus program.  The next Federal Reserve meeting is Sept 17-18, at which time we may see more clarity on that issue.  As discussed previously on this site, I consider the US economy a “sick hospital patient”, and as the patient recovers, it only makes sense to reduce the prescribed medications and various life support systems which are attached to the recovering patient.  Clearly some folks are worried if the patient will survive without medication and life support.  However, it is better in the long term if the patient learns to breathe on his own again.  

Let’s take a look at a 2 month chart of the SP 500 index, using “close only prices”, to see how things look.  I am calling 1685 on the SP 500 as our support level, as all the recent market closes seem to be at or above this.  I am happy to see that the SP 500 broke above the 1700 level, an area discussed in my July 26 post, as being a key overhead resistance area.  This occurred on Aug 1, Aug 2, and Aug 5, and returned to sub-1700 levels after that, largely due to Mr. Evan’s comments on Aug 6.   Let’s take a look at the chart:

In summary, I am still 100% S-Fund at the present time, and will monitor the I-Fund to see if a change is warranted in our TSP Allocations.  Note that August and September are typically the worst performing months of the entire calendar year, so any declines during August and September may or may not be a departure from typical historical behavior.

As always, if you find this site useful or informative, please share it with your coworkers and friends.

Thank you for reading

–         Bill Pritchard

Hello everyone

Just a quick note that things, as I see them, are in my opinion “ops normal” and I am 100% S-Fund in my account.  This week, my indications are that the I-Fund outperformed the other funds on a one-week basis, however I am not basing any trading decisions on this one week performance.  My data indicates that the S-Fund is the overall July winner (so far).

The indexes are reflecting “cautious” accumulation, in which more money is coming into the market versus money going out, with the NASDAQ (a tech heavy index with many up and coming companies), performing well.  I say cautious because July witnessed some down days…large investors are not jumping into the market with both feet.  In my opinion some Bernanke nervousness and other things are still in the air, affecting enthusiasm.

My charts of the SP 500 index reflect a potential Cup with Handle pattern forming, which is a pattern discussed by William O’Neil of Investor’s Business Daily, associated with bullish behavior.  The particular pattern underway now is NOT a perfect cup with handle, but in my opinion, it is closer to being a Cup with Handle than not being one.  Please see images below

Another observation that I have, is that the 1700 level on the SP 500 appears to be our new area of “overhead resistance”.  Any activity at, and above this, will  make the headlines as this is a new All Time High and the area of resistance.  The SP 500 hit 1698 on July 23 and July 24 than cooled off somewhat and came down from those levels.   Keep an eye out for 1700.

1670 is our support level and anything at and below this is undesirable.  On July 11, the Sp 500 had what I call a “thrust day” where its intra-day performance was much better than the prior days, with the index closing higher than the prior day.  This is akin to a person whose max bench press per workout is 200 lbs.   For five days he maxes at 200 lbs each day and on Day-6, he is able to magically bench 300.   The next few days after that, he is lifting 200, 240, 220, 205.  However you now know that 300 is possible.   That is what I see in the indexes.   Some one-day bursts of strength, a few flat days, another one-day burst, etc etc.  The summer months July-Aug-Sept tend to be lackluster, so I am happy to have July’s gains.

With that said, I remain 100% S-Fund in my account.   I will update folks as the situation warrants.   I ask that if you find this site useful or informative, please pass it to your colleagues and friends.

Thank you

– Bill Pritchard

Hello everyone

Arriving to the end of the first complete trading week after the July-4 holiday, I am happy to announce that the markets have closed higher each day, than the prior day, and are exhibiting the signs of a resumed uptrend.  The volume is not as high as I would like it, but the behavior across multiple days gives me the confidence to return to the S-Fund.   This week, the I-Fund actually outperformed everything else, but I am still a little skittish about the international markets in light of still unresolved issues internationally, such as Egypt, Syria, the Greece economy, etc.    If things settle down, I may be inclined to invest in the I-Fund.

No cool graphics today, just my opinion that G-Fund “safe haven” is no longer needed and it is safe to resume investments in the S-Fund.

Thank You.   Also take a look at the FAQ as I will be updating it over the next few days due to some good email traffic sent to me.   Lots of folks with great questions.

Thanks for reading….please share my site with your colleagues and coworkers if you find it useful or informative.

– Bill Pritchard

Good Evening

A very short update, as I want to see how this week shapes up.   On Monday, July 8, the market participants returned from the holiday with plenty of enthusiasm, sending the indexes up, on above average volume.  The SP 500 closed at 1640, which is an excellent sign, and ten points above our prior overhead resistance level of 1630.   July 8 price action resulted in a “gap” in which the low of July 8 was higher than the high of the previous trading day (July 5).  This results in a “gap” on the price chart.   This is a result of intense buying and accumulation, all of which are positive for the market.

Please stay tuned for another update later this week, as I want to see how the market does over the next few days.  However, this is a positive start to the week.   Lets keep our fingers crossed that it is not a one day fluke (I doubt it is…)

Thanks for reading

– Bill Pritchard

Hello to everyone

This week began on a positive note, with the SP 500 and other indexes closing up on Monday July 1.   The trading volume was not as high as I would have preferred, and as such, these “up moves” have questionable credibility.   Volume is the horsepower behind the move, and it is not where it needs to be yet.  The perfect day is an “up day” (end of day closing price is higher than the start of day price) on above average volume, ideally 25% (or more) above its average trading volume.  These two things, when occurring during one trading day, is a positive thing.  Not one, not the other, but we need both.

Note that this week will likely see light volume the entire week, due to the July 4th holiday and reduced trading activity this week.

My personal observation is that we are looking for the SP 500 index to CLOSE at or above 1630 on multiple back to back days in order to believe that any new upward movement in the indexes are for real.  Let’s see how the next week or two play out.   It should be noted, that the months of July-August-Sept are historically (absent a few occasional deviations from this trend over the years) the worst performing months of the year.   What does this mean?  It means that if July 2013 is “down”, this does not mean that the world is ending.   Historically, July (and August and Sept) tends to be down.   Of course, we let the market tell us what to do, and if Mr. Market decides to give us great returns in July, I am not going argue and will take what he gives me.

On July 2, the indexes performed well during most of the day, then turned downward in the afternoon, with the SP 500 closing below the 50-day Exponential Moving Average (EMA), which is a key trend line, to help determine trend and health of the market.   The 50-Day EMA is 1611.   This EMA will change as the days ahead progress, but for now the thing to be aware of is that a “close” (last price the market traded at when it closed/stopped trading for that day) near or below 1611, is not desirable.

Let’s take a look at two charts of the SP 500 Index, one with a 3 month view, and the second chart being a 1-month view, with my comments.

I am personally still “long” (holding stocks that I bought) in my personal brokerage account, and since they are still doing relatively well, I have held on to them.  However, my TSP Allocation is 100% G-Fund.  I will monitor things and advise everyone as warranted.   I recommend everyone watch the SP 500 index and keep their eyes out for activity at or above 1630.    The remainder of the week will likely be low trading volume and thus, whatever happens, is probably not worth considering for our decision making.  If you turn CNBC off the rest of the week, you probably won’t miss much.

Thanks for the interest in the site, and if you find the site informative or useful, please pass it to your friends and coworkers.   I have received quite a few nice emails this month, thanks for those.

Take care everybody

– Bill Pritchard