Good Evening,
A lot of folks are saying that it is looking a lot like the stealth correction we had in March. They say that correction (or whatever you want to call it) occurred at the beginning of earnings season and resumed after a short three day bounce that looked a lot like today’s bounce. You know what? Even if this turns out to be the same thing, it is not as bad as it sounds unless, of course, you are 100% in small caps. Nevertheless, let’s take a look at that dip for a moment. It ended at about 7.8%, so it did not meet the technical definition of a correction. It did hurt though while it lasted. At the time I was sure it was the big long overdue correction, but guess what, I was wrong. I got out of equities and into bonds at about minus three percent. I didn’t mess around. I was looking good, just like the old days when the market abruptly turned around and headed up on low volume never to look back. Can you say whipsawed??? At the time I thought that the FED’s tapering of the bond program had to be the key. Now, three billion in tapering and two more whipsaws later, I had to tell myself that maybe, just maybe it’s something else. So what was left by process of elimination? The interest rates, the only other thing that the FED messed with. That’s the only other thing that changed. The thought came to my mind of Bill Clinton’s presidential campaign when he said ‘it’s the economy stupid’ so I had to tell myself “Scott, it’s the interest rates stupid!!” They had a far bigger effect on the market than I had anticipated. My charts had been crystal clear, I had just refused to believe it. It’s better to err on the side of being to conservative right?? I don’t think so! Lost profit is lost profit and not having been in this situation before is no excuse. So after being whipsawed three times I am not changing my mindset until the FED changes their interest rates. To repeat myself from last night. I will get out of the market if and when I get a sell signal, period. This may be the time, but I really don’t think so. Based on the most current FED statement, we really don’t have to worry about an interest rate increase until at least the third quarter of 2015 and maybe not until 2016. Also, as I said earlier, you don’t want to be anywhere near bonds when that day comes. All that said, this may be another three day bounce after which we roll over again as we did in Mach, but also like March there’s still a lot of cheap money out there fueling this market. That has not changed and neither has the likelihood of another V Shaped recovery. I don’t need a fourth time to figure that out. So I’m running my system straight up, no if’s , no and’s, and no but’s about it.
There are probably some high fives on the trading floor. Stocks snapped a two-day losing streak Wednesday as worries about the Fed’s interest rate policy abated.
| 07/08/14 | |||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 14.4612 | 16.3788 | 25.65 | 35.2762 | 26.7615 |
| $ Change | 0.0009 | 0.0324 | -0.1740 | -0.3727 | -0.2291 |
| % Change day | +0.01% | +0.20% | -0.67% | -1.05% | -0.85% |
| % Change week | +0.03% | +0.36% | -1.06% | -2.33% | -1.55% |
| % Change month | +0.05% | -0.31% | +0.24% | -1.36% | -0.36% |
| % Change year | +1.22% | +4.05% | +7.43% | +4.77% | +4.68% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 17.2289 | 22.6764 | 24.5728 | 26.1292 | 14.8558 |
| $ Change | -0.0236 | -0.0890 | -0.1260 | -0.1568 | -0.1021 |
| % Change day | -0.14% | -0.39% | -0.51% | -0.60% | -0.68% |
| % Change week | -0.23% | -0.70% | -0.92% | -1.09% | -1.25% |
| % Change month | -0.01% | -0.09% | -0.15% | -0.21% | -0.24% |
| % Change year | +2.45% | +4.04% | +4.75% | +5.22% | +5.63% |
