The Fed Trader

Good Morning

In my second AM update in two days, required due to the recent market turmoil, the Dow Jones futures are trading 100+ points (125-150, variable) lower this morning.  See image:

http://www.cmegroup.com/trading/equity-index/us-index/e-mini-dow.html

What this means is basically we have another rough day in store for us in the regular stock markets, today October 16.  Note that I made the same assessment, yesterday 10-15, pre-market, and this assessment was proven correct with the Dow Jones dropping at one point 350+ points.

To reiterate earlier statements, I remain in G-Fund, and have been in G-Fund since August, due to my observations and signals of market weakness.   This signals have clearly proven correct as all of 2014’s gains are wiped clean, gone, in recent days.   The other site’s claims of “we performed great in 2014” can be ignored, and sadly the “other sites” have done nothing, zero, to protect your current balance from damage.  Most other TSP sites are currently frozen in gridlock, gripped by panic due to the recent turmoil.   The world is great until it is not great.   Meanwhile, this site seeks to get folks “off the X.”  This is the difference between this site and other sites, who are chasing gains and pat themselves on the back when their broken clocks happen to have the correct time twice a day.

Those in G-Fund have seen no damage to their accounts, and remain safe from this violent and damaging storm. 

I remain 100% G-Fund.   Thanks everybody and have a good day !

– Bill Pritchard

Good Morning

As I head out the door, I took a look at the Dow Jones futures market, which trades overnight.  Dow Jones futures are down 130 points.   Current time is approx 7:55 AM Central, the regular stock markets open in 35 minutes.

Futures almost always reflect the “mood” of traders going into the regular stock markets, so today may be a rough day.

Keep those seatbelts on…

– Bill Pritchard

Good Evening Folks

Well, today it is October 13, and maybe that is a bad number to start the week on, as the Dow Jones is down over 200 points.   Today, as most of us are aware, is a Federal holiday, however the markets were open, a sort of oddity but these things happen nonetheless.   Historically, Columbus day is a quiet day in the markets, as most schools are closed and it indeed is a national holiday.  Indeed, in past years, Columbus Day has witnessed reduced action due to traders and Wall Street participants on a three-day weekend.

Except for today’s Columbus day.   SP 500 and NASDAQ volume was huge, with severe losses on all indexes.   As stated, the Dow was down over 200 points.   The SP 500 is my “go to index” but I make mention of the Dow because every financial news site is in love with that index, so I will make reference to it here also.   The SP 500 Exchange Traded Fund (ETF), ticker symbol SPY, which trades like a stock and is designed to “mirror” the SP 500 index, traded lower on double its average trading volume.   A very important level, 1900, on the SP 500, was violently penetrated to the downside, today.

Lets look at some charts:

As can be seen via these charts, with comments on the charts, the Bearish action continues.  Important to note is that the index is now below its prior lows in the 1900 area, an area in which I went to G-Fund in early August, only to have the index (at that time) suspiciously reverse course upward.  I kind of beat myself up (and took a rubbing) on that “call” but I remained firm, as my system was indicating weakness ahead.  Many approached me one-on-one and asked my opinion, my reply was that I was remaining in G-Fund as I was skeptical of the that uptrend, which lasted most of August but on very low volume (apparent on above charts).  A few elected to be lone rangers and “do their own thing” (Type A personalities, gotta love our colleagues, bless their hearts) while others decided to remain in G-Fund.

Comment:  Remember my prior post about “8 weeks” from market peak and early warning signs, to when the real damage starts to occur?  My prior post stated “mid November” as the most recent market peak (8 weeks prior) was “mid September.”   BUT if we go back further, before mid-Sept, the market peaked in late July, approx July 25.   It then broke down and I went to G-Fund.   Using the market peak of July 25, lets add 8 weeks to that, that gives us Oct 25.   So my point (rambling…) is things may actually be falling apart now, versus mid-November.   That is kind of in the crystal-ball category but it is something to mention.

I continue to remain 100% G-Fund.   

Thanks for reading and lets see how this week plays out.  Please share, tell, demand, order your colleagues to sign up for email updates to this site, if you feel they would benefit.    Thanks !

– Bill Pritchard

Well, when I stated back on August 7 that I observed “cracks”  in the markets and market weakness ahead, and made my move to G-Fund (and advising my subscriber base), who would have thought that 8 weeks later the markets would have taken such negative hits like this week.   I made multiple, repeated, posts, since August 7, reaffirming my concerns of market weakness and desire to remain in the G-Fund, and this week is the perfect example of its role as a “safety cover and concealment” tool.   Some readers “grew bored” in G-Fund and returned to stock funds, which, I can understand, but those who remained in G-Fund have seen zero, none, no damage to their accounts.

Bloomberg News is reporting that the SP 500 index has had its worse week in 2 years, and the Dow Jones Index has erased all 2014 gains.  Just, wow.

Watching this from the G-Fund is like watching a train wreck.  Far enough so you don’t get hit by flying debris but close enough to see and hear the crash.   Sadly, I don’t think the train wreck is even fully going yet.  My crystal-ball (never really has ever worked, but…) is telling me “Mid-November” may be the start of the real pain.

The “other sites” (you know, the ones with no apparent owner, just some mysterious people who type stuff, or whose physical address is a Mail Boxes Etc. store) continue to advocate stock allocations instead of the G-Fund.   Good Luck with that.   Remember, I look at things mostly from a price/volume and “behavior” perspective, not one day this, one day that.   I look at the overall “animal” called the market and make my decisions that way.   Don’t be swayed by one day “up days.”   We had “the strongest day in 2014” on Oct 8. 

That didn’t last long.  A dying dog can give one more hard kick before the lights go out.

I remain 100% G-Fund…I try not to reach out and catch falling knives.   The Fed Trader has been the only site to discuss the importance of G-Fund, as early as August 7, remaining safe in the G-Fund since that date. 

Everybody have a good weekend, and if anyone (and their TSP balance) could benefit from the discussion and commentary on this site, please share it with them. 

Thanks !    Take care

– Bill Pritchard

Hello Everybody

On 10-07 the Dow Jones got slammed with a 272 point loss by end of day.  This is not the signal of a pending new upturn.  Lets take a look at some charts:

As stated, the Dow Jones Index went down 272 points.   This is a very significant amount and associated to institutional investors “fleeing” the markets.  The various financial news websites are discussing Europe fears, etc. stuff, but as you know, on this free site, since August 7, I have discussed my own concerns of market weakness.   Eight short weeks later, October 7, and the wheels are starting to come off  the market’s axle, as the bus apparently rolls downhill with no brakes and no concern for the destruction it leaves behind.   Unless, of course, you are in G-Fund, which is where I am now. It should be noted that all TSP Stock funds had negative returns in September, a month that I was in G-Fund for the entire time, as were many Fed Trader followers.

It should be additionally noted that last week, Thursday 10-02, and Friday 10-03, the markets went up, on decent volume, and some “experts” in the financial press could be found celebrating how the prior down days (before 10-02) were “temporary blips” and the “market is going into the weekend on an upbeat note.”   Some sites celebrated the “positive jobs report”, ignorant of the fact that the positive jobs report only added another layer of cement onto the sealed deal called guaranteed interest rate hikes in 2015.  

The 1965 level which I discussed on this site on Sept 30, was barely touched and no significant penetration on 10-02 nor 10-03, so I immediately knew those days’ action were just a feeble attempt by the market to make some final gasps.  

It is valuable to note that in prior Bear Markets, the major flash fire really only got going until 8 weeks after the recent market peak of the prior Bull.   Some smoke and a few sparks here and there, but the major crash did not start for 8 weeks or so (approx).   Our peaks in the NASDAQ and SP500 have been basically “mid September” so using this general guideline, it is possible that “mid November” we see a major downward slide.  Possible.   This may be a little earlier or a little later.   But if my beliefs are correct that a new Bear is in the works, then my opinion is “mid November” is something to monitor. 

None of the above, or information from my prior posts, has been put forth by similar TSP websites, easily found via Google, of which many exist.  Nobody is talking about increased volume and distribution, or support levels on the SP 500.   That level commentary is available at the The Fed Trader, but nowhere else.   If you want cut and pasted news articles and regurgitated “buy and hold” mantra, it is readily available, trust me.   If you want tactical decision making and the reasons behind it, only one place has it, The Fed Trader.   A cursory glance at “the other sites” show many absurd recommendations, such as S-Fund, partial L-Fund and C-Fund, and other stuff.   Folks, the Dow Jones (over the last few weeks) has taken 200 point, 250 point, 272 point blows.  That is not a “we think the market will do this” or “it is likely that” kind of stuff.   Those triple digit losses have happened.   They occurred.  Period, the end.   Also,  we have a fundamental/economic back-drop of pending interest rate hikes, European economic concerns, military action against ISIS (which will cost money and impact the federal budget), mid-term elections, and other things in-play.    Let the numbers talk.   Fed Trader readers in the G-Fund in September, lost no money to their account balances.   Other website readers, lost money.  S-Fund was down 5% in September.   That means a $500,000 TSP non-Fed Trader subscriber saw $25,000 evaporate in September.   

I remain 100% G-Fund.   Please continue to share this free site with your friends and colleagues.  I sign my name after every post and my picture is posted in the event someone wants to throw darts at it.   I encourage folks to find a similar site which does the same and has the same transparency.  

I hope everyone has a great week. 

– Bill Pritchard

Hello Everybody

Today is Sept 30; the markets have continued to decline since my last update on Sept 25.   It is worthwhile to mention that since August 7, I have expressed my personal opinion regarding concerns that the market is weakening and becoming a risky place to be in.   Since August 7, I have been 100% G-Fund.   I got a few reader emails regarding being over-conservative and some “missed gains” but I stand by my opinion that the markets are deteriorating.  I have wished and hoped for positive signs, and believe me, watch the market everyday, searching for a slice of good news or rays of sunshine between the storm clouds, but have not seen any yet.

Today we had another Distribution Day in the markets, and according to the folks over at Investors Business Daily, we are at 7 Distribution Days for the NASDAQ and 6 days for the SP 500.   I include “almost distribution days” in my personal assessment of the markets, as “almost days” are important to be cognizant of, even if not technically qualifying as Distribution days.   We have had a handful of “almost days” in both indexes.   As discussed on this site, multiple days of distribution, typically four to seven, within four to six trading weeks, tends to stop existing uptrends and reverse them into downtrends.   We are basically at that point now.  

Lets look at some charts.  I used SPY ETF for a better snapshot of volume activity of the SP 500.  Note that 1965 is the new support level for the SP 500.   Any penetration below this level is yet another warning sign of an upcoming (and now probable) Bear market.

As we can see, the index continues downward, with increased volume during the recent few days.   It should be noted that a frequently used Small-Cap Index, the Russell 2000 (the TSP S-Fund will behave very close to this index), is already below its 200-day Moving Average, which is a Bearish (negative) sign for small-cap stocks.

It is valuable to consider the fact that prior bear markets caught most people by surprise, this occurred in 1987, in 2000, again in 2008 (although less so, most woke up to the fact that a grave crisis was in the works), and will probably occur again this time around.  History almost always repeats itself.   In almost every case, investors were riding the euphoria of a prior bull market and “good times”, and with their heads in the sand, got blindsided by a bear market.   However warning signs exist, all documented on this site, of a possible looming bear market.  This can occur gradually “death by a thousand paper cuts” or can start with a huge slam down, then a continued, but gradual, downward trend.   While one cannot predict the severity of the next bear market, one can control his exposure via allocation decisions and diversification, to include being entirely out of stocks all together.

Now, the market may magically reverse direction tomorrow and go to the moon.   And if anybody wants to be out of G-Fund, it is me.   But, I don’t see that happening.

In summary I continue to remain 100% G-Fund.

I ask that everyone continue to share this site with friends and colleagues.   Subscriber numbers have gone into the stratosphere, and I want to keep the momentum going.

Thanks and talk to everyone soon

– Bill Pritchard

Good afternoon from a major airport Admirals Lounge and Wi-Fi….

In the “I kinda mentioned this” category, today the market’s engine lost a few more cylinders, with the Dow Jones index dropping 250 points in one day (we have approx 2 hours left to go….present time is 12:55 PM Central Time).

Financial media is advising that this is the largest decline in 8 weeks.   Note that this is on HIGH VOLUME….this is clearly undesirable behavior.

Note additionally that I personally cannot find any other TSP information site, or even most of the major market news websites, that has taken the lonely position I have held since August, in which I presented my opinion that the market was weak and subject to additional declines.   Since August, I have been in G-Fund and continue to remain in G-Fund.

Talk to everyone soon….I will be boarding a flight soon and off the air for a few days in travel status.

– Bill Pritchard

Good Evening

I will keep this update brief, as I am TDY on the road, so no cool charts this post.   It is also almost midnight and just got out of my “simulator training” which means torture for 4 hours in the flight simulator, testing the pilot’s ability to deal with engine fires, ice covered runways, blown tires, and other things.   Prior to that was 4 hours of “ground school” consisting of questions and answers and refresher on aircraft systems and procedures.  So my brain currently is not fully operational.

Long story short, the markets continue to display weakness (since August 7, I have spoken regarding the market’s apparent weakness and lack of volume) and the markets have not celebrated the recent Federal Reserve Chief Janet Yellen’s comments regarding the economy.   The media was speaking highly of the “good news” associated to this meeting, one news of which is no apparent acceleration of the date of the looming Summer/Fall 2015 interest rate hike.   The markets did not “jump for joy” over this, and were up, I believe 40 to 50 points on the Dow for the day.   I knew something was wrong as soon as I witnessed this lackluster response.

Recent sessions have seen above average volume and selling, aka “distribution.”   As stated here, multiple days of distribution, typically four to seven, within four to six trading weeks, tends to stop existing uptrends and reverse them into downtrends.  The Distribution Day count is five for the NASDAQ and three for the SP 500 since Sept-3 and a few “almost distribution” days on both indexes.

The Russell 2000 Index, depending on what metric you use, is arguably already in “bear market” mode.  This index tracks small cap stocks and behaves very similar to the TSP S-Fund.

Observers will query me,  “But we have made new highs”.   Well, yes, made them, only to reverse down every time we “make a new high.”   This is not the action associated to a healthy, energetic, uptrend.   The 4540 NASDAQ and 1983 SP 500 levels have been violated, these were discussed in my last post.

I will post updates as needed over the next week or so.  My stated belief that G-Fund is safest is still intact.  To emphasize, my personal opinion is that the markets are displaying weakness and their behavior is a possible prelude to a new Bear Market/downtrend, potentially damaging to TSP account holders exposed in stock funds.   This is my personal opinion.   Sometimes you gotta be strong when skeptics exists….I am sticking to my guns (no pun intended….) and stand by that position.   Observe that I am more concerned with loss protection than gain realization, as gains (the “scoreboard”) will take care of themselves.  Catastrophic losses however, are something difficult to recover from.

Thanks everyone…..talk to you soon

– Bill Pritchard

Hello Folks

Well, the markets continue to display weakness and low volumes, albeit their arrival to All-Time-Highs in prior days.  It is almost as if they have coasted uphill, with no engine power, and are slowing down, running out of speed and momentum.   Yes, the powerless car has coasted up the hill and has travelled a pretty good distance, but what is under the hood ?  Is the engine still functioning properly?    Do we want to get into this car and trust that it can transport us somewhere ? 

Above are the the most recent charts of the NASDAQ Index and SP 500 Index.

Scrutiny of these charts will reveal the obvious “All-Time-Highs” achieved on Sept-4 for the NASDAQ and Sept-3 for the SP 500, however on both dates the indexed opened “up” in the morning and closed lower than the open price, on above average volume.  So while yes, a new “High” was achieved, it was in the initial opening stages and the markets sold off both days after the high was attained.

Also note on Sept-2, the first day after the Labor Day weekend (Monday Sept-1 the markets were closed), Wall Street appeared to be in good spirits, with decent uptick and buying on the NASDAQ.   The SP 500 was ho-hum on Sept-2, not hugely up, and not down.  However since Sept-2, the markets have seen some “Distribution Days” (discussed in depth on this site previously) which are undesired.   My own studies, combined with research and studies performed by the folks at Investors Business Daily, reflect that after four or five days of Distribution over a span of four to five weeks, the markets almost always turn down.    We have had two days of distribution and one day of “almost distribution”, on both indexes.   The clock has started on Sept-3 (Distribution Day-1), and we need to monitor additional distribution days thru Oct-3 (four weeks minimum).    Lets take a look at the charts again, but with my comments on them:

It is also apparent that the new support level for the NASDAQ is 4540 area, anything below that is undesirable.   The support level for the SP 500 will be 1983 area.     More important, well, just as important, is volume action.    If we hit say 1975, on low volume, ok, I am not losing sleep, although that is undesired action.   But if we hit 1975 on huge volume, major red flag.

To supplement my chart analysis is the Accumulation and Distribution Ratings from the folks at Investors Business Daily.   Basically, A is “good” and E is “poor”, with “A” representing huge institutional money in-flows to stocks, while “E” is heavy selling by institutional money (aka mutual funds, pension plans, hedge funds, etc.).    Lets take a look at the ratings for the SP 500 Index since Aug 27 (about two weeks ago)

So, going back two weeks, we don’t really see any huge changes in these ratings.   No major improvements to “justify” the recent uptrend which indeed has occurred.  I have been a skeptic of this uptrend, and chosen to pass on possible gains (those that remained in stocks did, indeed, achieve some gains) to instead monitor things a little longer.

To recap:

1. We have two distribution days since Sept-3.  
2. Volumes have been light until Sept-3, indicating a prior lack of interest by major money managers in accumulating additional stocks.
3. Yes, the index has climbed upward, however this is on low volume (#2) and my opinion is the “new uptrend” is suspect
4. 4540 NASDAQ and 1983 SP 500 are the levels to keep an eye on.
5. I am personally 100% G-Fund

As stated previously, I am tweaking my system somewhat (not hugely, however) as many have emailed me seeking a little more risk (and possible gains) instead of being conservative.   Not everybody mind you, some appreciate the conservative approach, but there exists a clear “fan base” if you will, that has voiced a tolerance for more risk.    This modified system is still in beta-testing and is almost worthy of a patent, but since my system is largely math-based, I doubt that a patent will happen (can’t put a patent on math).  It is also primarily NASDAQ based, versus SP 500 based, which arguably is becoming “Dow-Like” (Dow Jones Index is only 30 stocks).  The inclusion of the NASDAQ as a data source is showing promise. Expect a “roll out” of this system in another month or two.  

Please continue to encourage your colleagues to subscribe to this free site, and thank you for the great emails and the interest.   As a fellow TSP Participant, I have “skin in the game” and I put my name after every post.   If a similar site (and there are many) is not putting their personal name behind their product, what does that say about the product ?   

For those who view the site via the web (versus subscribe for email updates), I would encourage you to sign up for an email subscription.   This does a few things, 1) you get the updates mere seconds after I publish them  2) once received via email, you can refer back to it without having to rely on an internet connection.  3) Emails can also be printed and thrown in your briefcase etc.  Some of the updates reflect time critical information- email subscribers get the update immediately. 

Again, I am 100% G-Fund for the present time. 

Thank You for reading… 

– Bill Pritchard

* This update published 09-09-14 at 11:30 PM CDT

Hello Folks

Well as we finish up the week, my immediate observation over the last few days is that the market volumes are very low.   The fundamental/economic situation aka “background” has not changed (and how could it, my last update was merely six days ago), and I still see no justification to leave the G-Fund in pursuit of questionable upticks.  

It should be noted that the SP 500 Index made a new All-Time-High (“ATH”) on August 26, attaining 2005.04.    This is a new, all time, historical high.   Now, many will recall that I love ATH’s, and if you trade a personal stock account, when a stock makes an ATH, this is a very reliable signal to buy some of that stock.  I don’t want to get side-tracked on personal trading, but the concept is equally important when looking at the indexes.  However the ATH “buy signal” must, or almost-must, always have above average volume with it.

Above average volume is reflective that the underlying event (the ATH), is sustainable, as there are “voters” (buyers) in large numbers, behind the move.  Versus a floating sailboat on the lake which just, by the stroke of luck, caught a breeze towards Bull Market Island.   A light breeze and a random drift, even if in the “correct direction”, does not equal a clear cut path, with sustainable force.

It should be noted that Bull Markets need volume to propel and to sustain them, but Bear Markets can fall apart on their own.  Volume is not a requirement to make a market cavitate and go down.   That’s what makes this particular situation somewhat dicey, we have a mature Bull Market (depending on what indicator you are using, most accept that the current Bull Market has existed since late 2011), and the volumes are starting to dry up.   Furthermore “Institutional participation” (pension fund plans, mutual funds, hedge funds, etc.) is slowing down.   Institutional money is what moves markets, not Uncle Raymond with his E-Trade account.    Investors Business Daily measures this in their Accumulation/Distribution Rating.    Basically “A” is strong buying (which tends to send stocks upward) and “E” is heavy selling (which tends to send stocks downward).    Heavy selling is a bad sign.   Unfortunately, while our sailboat apparently caught a breeze and sent it upwards, since August-1, the SP 500 distribution has hovered between D and E distribution.  

I use the Accumulation/Distribution Rating as one of many tools to assess the temperature of the market.   See photo of my whiteboard at home, with dates and accompanying rating, below:

I do this every evening, as a “supplemental tool” in addition to other tools in my system.   Notice a few “E” ratings over the last few days.   The highly desirable “A” or “B” are nowhere to be found.

Gee Bill, that is great, but can you give us some charts of what we should see ?

Yes, of course, lets take a look at the chart of the SP 500 back in March 2003.  Note that “war” is a major catalyst for the markets (FAQ #6) and back in 2003, we were not battle fatigued like most agree our country is now.  Sept-11-2001 was still very fresh in our memories and the nation was “coming together” and being patriotic on all fronts.  We also (in 2003 to 2008) had a major housing boom (inspired as we now know) by some easy lending and mortgage activity.   People bought houses, and send bank stocks, home builder stocks, Home Depot stock, etc, higher.    Lets take a look at the 2003 charts, with no comments, and with comments.   Pay special attention to the VOLUME activity.

That is what we are looking for.   Now, I doubt we will see those kinds of volumes now, as in March 2003 most folks were out of the market, having been hurt in the previous cycle of NASDAQ 2000 crash.   So the swimming pool had water but no swimmers.   In March 2003, the whole neighborhood jumped into the pool and a resulting major splash was seen on the volumes.    Today, 2014, in our three year old (or so) Bull Market, those who are inclined to buy stocks, are already in stocks.   So a legit question to be asked is “who is on the sidelines that can come in and send stocks higher.”   And by looking at the Accumulation/Distribution ratings, the institutional investors are exiting, versus entering, stocks.

Lets take a look at the charts, without comments and with.   Keep the above volume observations from the 2003 charts, fresh in your mind, as you look at the August 2014 volumes while the market is “making new record highs.”   Again, hey, I would rather have a new high versus a new low, as I am the last guy who wants to spend his life in G-Fund, but the fact remains that the volumes are low and things are still questionable, in my opinion.   Charts:

Lets take a look at a closer up view now:

You can see the clear uptrend, past the 1990 area (area of prior resistance) but the volume just isn’t there.   Now:  If we get just one day (ok, maybe two) of above average volume, with the index closing higher than the open, with clear, obvious, “thrust” upward, I will be back in C or S fund.    I will send everyone letters of apology for those who spent August in G-Fund.   Just remember, the recent “uptrend” has been on low volume.   Volume is as important, if not more important that the actual price movement itself of the underlying index or stock.  

A very easy, non-chart, way, to monitor volume is go to Yahoo Finance and look at the SPY ETF, which tracks the SP 500.  I apologize for the full size image with all the white space, I am cutting and pasting screenshots past midnight on minimal sleep….

So, you can use the SPY ETF to monitor volume.   If the individual trader gets a grasp of volume and trend direction, you can enhance your performance greatly.

OK, most folks are worn out by now with all this volume talk.   Long story short, I remain 100% G-Fund, pending some volume increases and “reassurance” that these new highs are sustainable.  

I will be monitoring things and any major events, I will post an update on this site.

Thanks and everybody have a good Labor Day weekend.  Markets are closed on Monday Sept 1, FYI.  Friday Aug 29 volumes should be very light, as Wall Street prepares for the long weekend.

– Bill Pritchard