Good Evening, It’s never peasant to write about a selloff. It’s kind of like reliving a root canal! The selloff continued today with the Dow suffering it’s biggest one day plunge in history. A lot of folks panicked at that news. However, to put it into perspective the Dow also covered the last 1000 points in record time and was at a record high. By the matter of fact the last three 1000 point rises were covered with historical speed. So I’m really not surprised at the hefty amount of profit taking. I must admit though that I was taken with the speed of this pullback. 4.6% in one day is a quite a bit. I guess if you want to justify that you can do so by saying we haven’t had a meaningful pullback of more than 3% in two years. We were due and boy didn’t the market deliver. Traders were all expressing the same concerns about rising treasury yields and rising interest rates. Once again, I’m not really surprised at the pullback just at the rate of the pullback. So where do we go from here? As it sits the S&P 500 it’s off it’s record high by about 7.9%. Not a correction yet but a little more selling could get us there in short order. All our equity based charts are showing signs of strain. At this point some technical damage has been done. On each of our three equity based charts price sliced through the 20 and 50 day moving averages and closed at or below the 100 EMA. In conjunction with that, one of our primary indicators the 5 EMA, crossed down through the 20 EMA. Of course that’s only one indicator and we make decisions based on three or more indicators. That said, we consider it to be in a negative configuration when it crosses below the 50 EMA. As of this time it is challenging the 50 EMA and could make a negative crossover with a little more selling. Those are the technical levels that have been breached as of today. On the positive side of things, the charts are all getting stretched to the downside. Our overbought/oversold indicator the Williams %R is oversold and calling for a bounce. Whether that will result in a new trend up or not is a good question. It really depends on the mentality of the market players. If they feel trapped they will no longer buy the dips but will sell the rips which will put downward pressure on any rally. I honestly can’t say where their at. I’ve talked to folks in both camps. Then there’s the machines. It’s obvious that they are programmed to sell at this time, but for how long and at what point will they buy again? You can bet that when they do they will manufacture a sudden reversal. That has been the case for several years now. So those that exit their positions will likely get left in the dirt before they can get back in the market. Which leads us to the question that everyone is asking. Should we sell? If our charts throw up sell signals we should strongly consider it, but if and only if they are strong definitive signals. There is a great and inherent risk in selling right now do to the aforementioned computer algorithms. We discussed in several recent blogs about how the market fundamentals are healthy. Corporate earnings are good and the majority of those that have reported have issued excellent guidance due to savings from the new tax bill. The only real concern is the rate at which the FED will have to increase interest rates to fight inflation. I personally don’t see that being a game breaker in the first half of 2018. While I do think it will be more volatile than in the recent past, I feel that there is money to be made for those that are able to stick this out. That said, my game plan is to give this market every chance that I can before I sell. That will mean sell signals in all my indicators and an SCTR below 40 on the chart for the C Fund. I will not sell if I have a neutral signal. Markets seldom fall apart all at once. With that in mind I am still looking for a reversal. Who knows? I may get egg in my face this time….. All we can do right now is take this day by day.
The days blood letting left us with the following results: Our TSP allotment dropped -4.10%. For comparison, the Dow lost a whopping -4.60% (It’s largest one day drop in history), the Nasdaq -3.78%, and the S&P 500 -4.10%. Wow, all I can say is that I can’t wait for that bounce! It should be a dandy it we get it.
The days action left us with the following signals: C-Neutral, S-Neutral, I-Sell, F-Sell. We are currently invested at 100/C. Our allocation is now +2.42% on the year nit including the days results. Here are the latest posted results.
| 02/02/18 | Prior Prices | ||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 15.5741 | 17.7872 | 38.9033 | 49.2152 | 31.9671 |
| $ Change | 0.0012 | -0.0735 | -0.8413 | -0.9640 | -0.4576 |
| % Change day | +0.01% | -0.41% | -2.12% | -1.92% | -1.41% |
| % Change week | +0.05% | -0.88% | -3.82% | -3.61% | -2.74% |
| % Change month | +0.01% | -0.68% | -2.16% | -1.74% | -1.33% |
| % Change year | +0.22% | -1.81% | +3.44% | +1.55% | +3.60% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 19.6868 | 27.1979 | 31.3233 | 34.2244 | 19.8863 |
| $ Change | -0.0781 | -0.1860 | -0.3719 | -0.4805 | -0.3168 |
| % Change day | -0.40% | -0.68% | -1.17% | -1.38% | -1.57% |
| % Change week | -0.72% | -1.25% | -2.17% | -2.57% | -2.91% |
| % Change month | -0.40% | -0.68% | -1.17% | -1.38% | -1.56% |
| % Change year | +0.70% | +1.14% | +1.91% | +2.23% | +2.52% |
