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Hello everyone

The markets have rebounded from last week’s dismal performance, which was arguably caused by the tragic events surrounding the Boston Marathon, poor economic news from China, and other factors.

As we know, the suspects in the Boston Marathon incident are either dead or in custody, due to the great work and cooperation between members of the public, and our law enforcement and public safety community.   There is no doubt that their quick capture/demise “sends a message” to the world, and as we finish up this week’s trading, the markets have (not surprisingly) rebounded, as uncertainty and questions regarding the Boston incident are now able to be addressed.

Some have emailed me and asked me why I did not panic regarding last week’s downtrend.  As most of you know, I use a combination of fundamental and technical analysis, combined with historical “look back” at similar events and situations when I see the market begin to stumble.   One of my tools in my “toolbox” is the use of Moving Averages, which in simple terms is a moving trend line which responds to the price activity of a stock or index.  A very popular Moving Average is called the “50 day Moving Average“, and my backtesting and research reflects that as long as a stock or index closes (not intra-day price behavior but closing price) at or above this line, then the trend is likely to remain intact.  Multiple closes below this line is a warning sign (coupled with other data and information prior to pulling the sell trigger).  My use of Moving Averages was documented in an article written by me, published in the January 2006 issue of Technical Analysis of Stocks and Commodities Magazine, which is sold nationwide at Barnes and Noble.

Lets take a look at the CLOSE ONLY price performance of the SP 500 last week.   See charts attached.  First chart is normal price chart, showing high, low, and close, second chart is close only with no comments, second is with comments.

As we can see via the above charts, the same information becomes more clearer depending on how it is viewed.   Time allowing, I like to use “close only” charts when we hit speed bumps in the road, and by combining this with other data and information, I am typically able to make a decision and rest better knowing the decision was made with all available information.

On April 13, 2013, I posted some commentary regarding the Boston Marathon bombing and how the market may respond.  In support of that post, I went back to some historical events, to include the 9-11-2001 attacks.   The markets at that time (let’s remember, behind the markets are people and emotion) responded initially with a downtrend, then rebounded strongly and went up.   So my crystal-ball (which rarely works but I still keep it on my desk….) told me that unless human beings got reinvented and the new 2013 versions of humans on Wall Street did not have fear, greed, panic, hope, etc running through their veins, then the market response to Boston would probably be similar.

It turns out that my crystal ball decided to work, as a look at chart one above, shows an apparent “U turn” or reversal to the downtrend and an apparent resumption of the uptrend.    Time will only tell if this uptrend continues.  We are seeing some resistance in the 1575-1585 area.   Most will remember that 1576 is the prior all time high, dating back to 2007 (already penetrated), and is still recent enough to be a significant area, and any close above 1576 is a positive.  1597 is the newest recent high, achieved on April 11 2013.  Anything above that represents new territory and further confirmation of the uptrend.

On 04-25-13, the SP 500 climbed thru the 1575-1585 resistance area and was able to hit 1592 intra-day, before closing at 1585.   So we are seeing some definite attempts to get up to new high territory.

If all that sounds like Greek, in summary, any SP 500 price action above 1576 is good news, and as of now, the the next goal is price action above 1597.  Anything below 1570 is indicative of sickly performance and this will require close monitoring of the index.

I continue to advocate to use the SP 500 Index as a “big picture” view of the markets.  Some have emailed me, asking why I don’t use NASDAQ or the Dow.  The NASDAQ is susceptible to being driven lower by major NASDAQ members such as Apple (AAPL), which has suffered some setbacks to its stock performance in the last few months.  However just because AAPL is going down, does not mean that the entire stock market is going down.   The SP 500 is 500 stocks and in my opinion offers a better assessment of market health.

With that said, I am still 100% S-Fund, as it appears that the S-Fund will perform best this month (or “least worst” given the various market issues this month).

Thank you for reading.   As always, if you find this site useful or informative, please forward this to your friends and coworkers and encourage them to sign up for free email updates.  Thank You

– Bill Pritchard

NOTE: This Post was originally going to be published April 15 but I then decided to wait for the markets to open and close on April 16 and then assess things.

On April 15, 2013, the markets closed significantly lower, which most have theorized is a “panic response” to the unfortunate tragedy surrounding the Boston Marathon.  Shortly after 2:30 PM, the SP 500 ETF, SPY, traded an abnormally high number of shares to the downside, adding credibility to this theory.   It continued lower until the market closed.

This type of event, is considered a Black Swan Event, a concept discussed by Nassim Taleb.   This type of event is unpredictable and sudden.

Evening SP 500 futures found support, and did not trade lower than the prior daytime session.   This is somewhat reflective that calmer minds came into the picture and bought SP 500 futures (versus sell them).   Typically, the evening futures market is predictive of the next day regular stock market, which will be 04-16-13.

I feel it is important to take a look at the SP 500 index, going back to Sept 11, 2001, the worst act of terrorism on US Soil.   See below chart

It can be seen that after the initial panic response to this major terrorist event, the markets subsequently rallied, which would be a response not typically expected.   It should be noted that the market subsequently did crash, but this is not associated to 9-11, but to larger problems which existed big-picture, as most will remember many “stock market scandals” during the 2000-2002 era, such as Enron, WorldCom, Tyco, and others.   So 9-11 did not cause the markets to crash, and as noted here, once things calmed down, the markets rallied after 9-11.

Lets take a look at tonight’s SP 500 futures, as of 10:20 PM Central time 04-15-13.   You can see how the futures have “found support” and not traded lower than the day session.

On April 16, the markets rebounded, likely due to people reaching some reasonableness from a trading standpoint with the Boston Marathon situation.   All indexes rebounded strongly, with heavy volume and the indexes closing up.  Mid and Small-Cap stocks responded best on April 16.

The SP 500 closed at 1574, which is slightly below its previous all time high of 1576 set in 2007.   While the markets remain volatile and sensitive, I am remaining 100% S-Fund for the present time.

Thank You  – Bill Pritchard

Good Morning folks…

I say good morning because my computer clock says 01:20 AM, and once again I can’t say how cool it is to get the emails that I get from you guys.  We have a few talented “market watchers” in the audience, I had some of you tell me the SP 500 hit a new high.   Guys, I don’t want to sound corny but that is awesome.  Well at least I think so anyway.  Lets take a look at this weeks market action.

As everyone knows, on April 6, 2013, almost one week ago, I advised everyone that I was making a move to G-Fund, due to market behavior and the North Korea situation.   I am now moving back to S-Fund.   Here are my reasons.

1.   Maybe just me but I get the sense that the world is growing weary of North Korea’s statements and threats and the world is resuming their regular programming.

2.  The SP 500 itself is making new highs.  At the end of the day, don’t argue with the markets.

3.  The S-Fund is still the top performer, however on 04-11-13, the I-Fund really performed well.   Lets see if this is a one-day thing or maybe the start of something with I-Fund.  C-Fund is closely trailing S-Fund.

Please see below charts with notes on the charts themselves

Last week, we had some definite “yellow caution lights” which were 1) the market itself displaying some distribution days, 2) saber-rattling in North Korea, and 3) a couple of economic reports which didn’t help people’s moods.   While everyone loves gains, nobody likes a loss, and I am very loss-aversive regarding my TSP balance.   If I can keep the damage down to a minimum, then the scoreboard will take care of itself.   But if I recklessly pursue gains, I stand the chance to get hurt.   We had some nice gains Jan/Feb/March, so I prefer not to just throw those away.  Maybe I am rambling and I need to sleep but I think you see my perspective.

With that manifesto said, I will be moving 100% to S-Fund.   The markets have apparently resumed their uptrend, with the SP 500 penetrating the 1576 level, making new highs.   This is a milestone event.

In other news, some may have seen reports that PC sales are at all time lows.   As most know, the Macbook / Mac computers are not classified as PC’s.   With the popularity of Apple products, and Android tablets and devices, the PC just is not the hot thing anymore.  I predict demise for Microsoft (whose Windows 8 OS has received poor reviews) and related problems for antivirus vendors, who primarily service the PC market.   Apple products reportedly does not need antivirus but I am sure that will change.   This bad news hit the NASDAQ index, and dragged it down somewhat.

As a MacBook Pro Retina owner for travel, and Windows 7 Pro owner at home, I have to vote for Apple.  Dealing with Windows updates, firewalls, blue screens of death, etc etc just isn’t fun, not when the Apple just works.   When I have to become a semi-PC hacker and change system registry settings just to get Skype to work or so a Security Pack update will install itself, then what happened to the concept of ease of use for the customer.   Its not a shocker why Apple is taking the lead.

Thanks for reading

– Bill Pritchard

Hello everyone

This week has been interesting to say the least, largely due to some market nervousness and response to the tensions in North Korea.   Some negative economic data has come forward, such as a disappointing jobs report and a guy named David Stockman who popped out of nowhere with a new book to sell.  He claims that the world as we know it is crashing.    Maybe, maybe not- but there are two sides to every story, most of my audience knows that.

This prompts me to ask, “Is war good for the markets?”

War is never a good thing.  But if we look at the past two conflicts in which USA targeted a sitting dictator/regime, both the 1991 Gulf War, and the 2003 Gulf War-2, the markets rallied strong after we invaded.   See charts below.

The invasion of Afghanistan occurred in October 2001.  2001 was a time of market problems and scandals, as some may remember the Enron, WorldComm, Tyco, etc financial scandals.  The previously-run-up NASDAQ was crashing, having started its decline in 2000.  That was a falling knife nobody should have tried to catch.  The markets were flat during 2001 for the most part and the Afghan invasion did not affect the markets much.

So what happens if we target Kim Jong-un, a sitting dictator in North Korea, next door to South Korea, our allies and location of Samsung, Kia/Hyundai, etc ? Are there any similarities we can associate to Saddam and Kuwait ?    Will the markets respond the same ?

Moving back to market and TSP matters, the markets this week had two days of “distribution” (a term pioneered by William O’Neil of Investors Business Daily), which indicates selling by large institutions.

Since I am a believer of “react to the market, don’t try to out guess it” and “the market is always right”, my opinion is that 100% G-Fund is prudent right now.   No, I do not believe the world is crashing nor that the markets are headed straight down.   However in light of the North Korea tensions (not a big deal just a potential nuclear missile launch…), and the fact that we have had some nice gains since January, my opinion is lets lock those in and make a precautionary move to G-Fund.   

As always, if you find this site informative and/or entertaining, please share it with others.  If, at the very least, I have triggered a new interest in how the markets work or a desire to be more hands-on with your TSP, then I think that is very cool.   Thanks everyone…have a good weekend.

– Bill Pritchard

S-Fund was top performer in March.   See graphic below.  S-Fund is YTD best performer also.   For the third month in a row, this site has correctly identified the top performing fund(s) , out of ten possible choices that exist, using proprietary methods that I personally developed over almost 20 years of trading and investing experience.   We delivered (again) in March, with the opinion that the S-Fund would be the best performer.

Please continue to use this website for insight and opinion on market action and TSP fund performance.   I am 100% S-Fund at the present time.   Please pass the word about this website if you find it useful, entertaining, or at the very least has caused you to find some new interest in how the markets work.  Next stop is SP 500 – 1576.   Lets keep our fingers crossed.   Thank You – Bill Pritchard

I wanted to put out some commentary on the “Buy and Hold” investing strategy.   Like Elvis, it has a lot of fans, some who strongly defend their position and argue in favor of it.   However like, Elvis, it is dead.   Here is why.

In today’s markets, which I loosely define as year 2000 until present,  market volatility has reached levels never before seen, due to a variety of things, to include computerized and automated trading, financial problems worldwide, debt and currency issues worldwide, and other things.

Our goal, as a TSP investor, is to make (and keep) money.  So our goal, is to locate and identify trends and ideal entry points, and protect what we have (our balance) and what we have made.  Nothing more.   Our goal is not to get wrapped around the axle about why something goes up (or down), or P/E ratios, or similar matters.  I do recommend a “big picture” understanding of the fundamental economic picture, but not much more past that.  Again, our goal is to identify trends, the top performing funds/stocks, and get on the train.  Nothing more.   Lets take a look at Microsoft (MSFT) stock, one of the most widely held stocks amongst large mutual funds, such as those sold by USAA, Fidelity, etc.   MSFT has been labeled as a well run company, with sound financials, and a near monopoly (up until recently) in the world computer market.   Sounds like the ingredients for huge returns ?

MSFT has basically gone nowhere in ten years.  Nowhere folks.   So I bought it in 2002, and for ten years, have held it.   Still, nowhere.  Nowhere.  Flat line.

Lets take a look at Amazon (AMZN) stock.   For a large portion of this chart, AMZN was making profits but was viewed by skeptics as being a questionable business model.

Smart investors dismissed the “Wall Street experts” criticism of AMZN and observed that a new powerful trend was underway in 2002-2003.   Again, the goal is to make money. 

Put another way:   Jim the trend follower and Larry the Buy and Holder/Fundamentalist are out fishing and Jim sees some lightning and thunder.   Their goal is to not get rained on.

Jim:  Larry, dark clouds and lighting out there.  Lets head in.

Larry: Well, I don’t know Jim.  Yes I see it, but I just can’t wrap my mind around what is causing that lighting and thunder.   I watched the TV news and the weather experts didn’t mention this.   Jim, I don’t know.   Lets standby

(thunder getting stronger)

Jim:  Well Larry, that stuff is getting closer, and look at that rain shaft over there.  I don’t want to discuss rain science on the lake too much longer, we need to take action and respond to what is happening. 

Larry:  Jim, I am not convinced.  I saw no mention of rain in the forecast for today, nor for tomorrow.  And this is a strange time of the year for rain, kinda early in the season.   You go ahead Larry, I am gonna hang back.  I just don’t think its gonna rain.

Jim heads in to safety and stays dry.  Larry subsequently gets hit by a lighting bolt and sinks with his bass boat to the bottom of the lake.

Lesson:  Don’t be Larry.

Please listen to the following audio file (one hour-long) for additional discussion on Buy and Hold and trend following.  Audio file courtesy of Michael Covel.

http://ec.libsyn.com/p/c/a/6/ca63145cd93bc479/TrendFollowingManifesto010313.mp3?d13a76d516d9dec20c3d276ce028ed5089ab1ce3dae902ea1d01ce8330d4c15efe48&c_id=5285247

http://www.forbes.com/sites/jakezamansky/2012/07/05/the-death-of-the-buy-and-hold-investor/

http://www.marketwatch.com/story/buy-and-hold-is-still-dead-2013-03-28

Thanks for reading

– Bill Pritchard

Hello everyone…

I wanted to provide an update and some insight into the recent market action.   As many of you know, the country of Cyprus, an island smaller than the state of Massachusetts, and with less than 2M people, has undergone some financial difficulties.  On March 15, the country’s banks were closed and the SP 500 Index closed down on very high volume in response to this.  The next two trading days it also went lower.   See chart below

Now, I don’t wish a financial crisis on anyone, so when I saw this in the news my first thought was “how will this affect the US markets.”  Sometimes being a skeptic is a good thing, and for whatever reason, all headlines that the Cyprus crisis was “just the beginning of something bigger” (and it might be, but…) just were not ringing true with me.  I mean, I just don’t know what Cyprus manufactures for the world markets or brings to the table.  I don’t believe the US banks and financial institutions have much invested in Cyprus.  Politically, we don’t have much to do with Cyprus, it’s not like we will count on them to bring their military horsepower to the table or need their political position to de-escalate tensions world hotspots.

So long story short, I don’t think Cyprus is a factor for the US markets.   If the health of an important financial / military / political partner deteriorates, yes, that’s a problem.  But in my opinion Cyprus is none of the above.

As discussed in previous posts, the “All Time High” (ATH) for the SP 500 was 1576, back in October 2007.   The ATH is the highest point, it has reached, if even for a second.  The highest close (the level it ended at prior to the close of the markets for the trading day) was 1565, on October 9 2007.  Some financial press is starting to talk about this (I mentioned it here two weeks ago…).   Both numbers are important, but the 1576 level is what I am personally watching.    I think we will see this happen in 30-60 days.    Please note, that any close above 1565 is still very significant.   So when you have cable news on during the morning, we are looking for SP 500 1565 or higher.   Not so much attention should be paid to the Dow Jones Index or NASDAQ.  The SP 500 is a better overall snapshot of the market health.

In summary, I think the S and C-Funds should continue to do well.  A look-back at this month’s performance (and the month is still not over) via my proprietary TSP performance tracking system, reflect that the S-Fund will likely come out as the leading fund this month.  However, C-Fund is running pretty close to the S-Fund, performance wise.   I am personally 100% S-Fund but 50% S-Fund and 50% C-Fund is fine also.

Don’t get distracted by some purported experts who claim the markets have “topped out” and “will crash soon.”   Please continue to utilize this site for trustworthy information and insight into what is happening.

If I see any red flags or warning signs, I will advise everyone.   Thanks for reading, and thank you for the numerous emails complimenting this site.   I have had the fortune to speak to some of you on the telephone, and its really great to have such a great group of folks reading this site.  Thank You.

– Bill Pritchard

Hello everyone…

I wanted to update everyone as to the markets and various TSP funds. In addition, our colleague Mr. Dan Jamison, has released an updated version of The FERS Guide, an excellent product which he has authored himself for many years. I have not met anyone with more knowledge on FERS retirement, and we are lucky to have Dan on “our team.” The updated edition is hosted on The Fed Trader, everyone should take a look. Mr. Jamison can be contacted at dan@fersguide.com

As we all know, Sequestration has taken effect. I touched on this topic in my March 1, 2013 post, and expressed my opinion that the markets would not be affected. Fast forward to today, and the markets have closed higher, every trading day since March 1. In my March 1, 2013 post, I reflected how the 1995 government furloughs didn’t affect the markets, and used that to partially shape my decision to remain in the S-Fund.

My data and proprietary system indicates that S-Fund is still the place to be, and I remain 100% S-Fund. Some investors may want to be 50% S-Fund and 50% C-Fund, which is fine also. However “mid-cap” and “small-cap” stocks are performing best right now and these are best represented by the S-Fund. This can change in the future, and we need to monitor things and change gears if the situation warrants it.

The best YTD performer, using January and February performance, is the S-Fund (see table below).

The SP 500 Index is 23 points below its all-time high of 1576, which occurred on October 11, 2007 (see chart). If the index is able to reach 1576, this a milestone event, and there will be no stopping the index from climbing higher.  Right now (and not surprisingly) the “experts” in the financial press are not talking about this, but this will be headline news if and when it happens.   Expect a small sell-off if it does hit 1576, as the naysayers will be talking “the market has topped out” etc etc.  However just standby as historically, all-time-highs are precursors for even higher territory.

At the present time, I am 100% S-Fund.

If you find this site useful, please share it with your colleagues and friends.   Thank You.

– Bill Pritchard

Incoming search terms:

• fersguide
• dan jamison
• fersguide com
• dan jamison fersguide

As discussed in this article, March 1 is here and the Sequestration deadline has arrived.   I will not get into the Sequestration discussion too much here, as plenty of that is available elsewhere.   However, lets take a look at the below charts of the SP 500 futures (showing trading after today’s regular stock exchange closures) and of the SP 500 Index.

The SP 500 closed today March 1 at 1518, on slightly lower than average volume, likely indicative that some fear existed and some market participants didn’t play today.   The SP 500 futures traded after hours hitting 1516.  The “1500 level” remains a key “floor” for the SP 500 Index.  Any drops below that are not desired.  Multiple days below that is a red flag.  The farther and farther we get above that floor, the better we are.

In summary, this week’s market behavior reflected that Sequestration is “priced into” the market.  We didn’t see any panic selling with the exception of Feb-25, which made headlines as “The Worst Day of 2013”.   Lets reflect that 2013 is only 60 days old.    I posted on Feb-26 that I was not overly concerned and was remaining in S-Fund.   I discussed what happened, market-wise, in the last government shutdown, in 1995 (not much happened).   After the Feb-25 sell-off, the markets rallied with the Dow up over 100 points the following days.

Sequestration (from the market standpoint) is “here”, although the President reportedly will not “sign anything” until 11:59 PM March-1.   However the date itself has come and is almost gone, and tomorrow is March-2.

So what does this mean for the TSP participant?   Well, speaking for myself only, I am still 100% S-Fund.  I am not loosing sleep over Sequestration, from the TSP standpoint.   If the markets crash hard next week, that will be a different story.  But my indicators and proprietary system reflect that no red flags exist.  I plan to remain 100% S-Fund for now.

Official Feb TSP performance data is not posted on the TSP site yet, but you will likely see S-Fund as the top performer or possibly C-Fund but S-Fund #2.  C-Fund flashed a few isolated days of strength that may throw the data to favor the C-Fund as being the leader in February.  However big-picture wise, S-Fund is still the place to be right now.   I don’t recommend chasing performance based on just a 30 day snapshot.  I prefer to look at overall behavior and trends, not a short time frame.   Obviously if we have a few bad days, we need to seek the safety of G-Fund.   But I look at this through the lens of other factors and indicators of mine.  This is akin to your child at school, he may have a bad quiz, but overall big-picture he brings home good grades.  A bad quiz does not make a bad student.  Multiple bad report cards could indicate something else (or maybe not, but we need to dig deeper).  So I approach the markets in a similar manner.

I am 100% S-Fund for now.  

Thank you for reading

Bill Pritchard

Hello everyone –

I am trying to post updates every two weeks or so, since most of the audience gets enough emails as it is, and do not need more, but I have received numerous emails regarding the Sequestration situation.   I am still 100% S-Fund for the present time.  The markets have sold-off somewhat this past week due to fears that it may not get resolved, however support is holding at the 50-day Moving Average of the SP 500.  This is a trend line that I use to gauge the markets health, amongst other things.

Today, the markets closed higher, mostly on positive housing news and positive reports from major retailers.

While Sequestration is not a “good thing” for most of us, I question the experts who say it is bad for the economy.  I am not so sure that Home Depot will stop selling leaf blowers, or Apple stop selling MacBooks, or Johnson and Johnson stop selling Band-Aids, on March 1.   Just my opinion.   Will it affect defense contractors and companies such as Lockheed Martin ?   Yes.    Could it have been done better, prior to reaching Sequestration ?  Yes, I think so.  But here we are, Feb-26, and we have no solution in plain view.

Some may remember the 1995 Government shutdown.

Lets take a look below at the SP 500 Index from that time frame.   Yes, I concede that the 90’s were the “boom years” of the stock market and witnessed many stocks going to record highs.   That bull market was a train that was hard to stop.  But, the below chart shows basically not even a hiccup during the shutdown.

Is 2013 different ?  Yes maybe it is.  Is it the same ?  Maybe it is.  I don’t know.  But I am not so sure that market-wise, big picture, some reduced government spending is bad for the markets.   This week observed some volatility and hiccups, yes.     More conservative investors may wish to go to G-Fund during these periods of volatility.   However I am still 100% S-Fund.

As always, thank you for reading.

Bill Pritchard