Good Evening,
More selling today! Don’t panic! This is healthy. Markets go down. That’s just part of the natural cycle of things. What would be ideal at this point would be some more selling. A correction of 10% or more would be a nice reset and would allow us to jump back in and make a little money instead of all this sideways trading and neutral charts. I had expected a bounce today after such a large sell off Thursday, but the bulls were just not able to overcome a worse than expected jobs report. The bounce will probably come Monday. However, I will be surprised not to see more selling to follow that up. Perhaps that’s wishful thinking, but like I already said, we really need a correction. Our TSP backed out the door with another small loss of -0.25% today and the AMP program had a great day posting a gain of +0.6825% beating the Dow again by over a full point.
Stocks finish tough week with more losses
The week’s tough action left us with the following signals: C-Neutral, S-Sell, I-Sell, F-Neutral. At last something besides a neutral signals. If we can get a little separation on those signals we will have something to work with! As of the close of business today, we are invested at 25/G, 75/S. I am disappointed to say it, but our allocation is now -6.03% on the year not including today’s results. It is the worst our allocation has ever been down since I have done this newsletter! The good news is, at least at this point, that the market appears to be acting somewhat normal again. If we can manage to get a decent correction it will create the type of opportunities that have been so good to us in the past. We serve an awesome God and the year’s not over just yet! Oh yeah, and the FED money is waning…. Here are the latest posted results. I recommend that you close your eyes if you have a weak stomach:
| 07/31/14 | |||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 14.4817 | 16.3986 | 25.2379 | 34.1944 | 26.3343 |
| $ Change | 0.0009 | 0.0056 | -0.5134 | -0.7206 | -0.2268 |
| % Change day | +0.01% | +0.03% | -1.99% | -2.06% | -0.85% |
| % Change week | +0.04% | -0.30% | -2.38% | -2.23% | -1.38% |
| % Change month | +0.19% | -0.19% | -1.37% | -4.38% | -1.95% |
| % Change year | +1.36% | +4.17% | +5.71% | +1.56% | +3.01% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 17.1852 | 22.4765 | 24.2796 | 25.7574 | 14.6143 |
| $ Change | -0.0582 | -0.1934 | -0.2708 | -0.3342 | -0.2132 |
| % Change day | -0.34% | -0.85% | -1.10% | -1.28% | -1.44% |
| % Change week | -0.41% | -1.06% | -1.37% | -1.58% | -1.78% |
| % Change month | -0.26% | -0.97% | -1.34% | -1.63% | -1.86% |
| % Change year | +2.19% | +3.12% | +3.50% | +3.72% | +3.92% |
That’s a lot of RED to be sure! We got our sell signal in the S Fund today. All Charts are courtesy of Stockcharts.com.
S Fund – I have annotated the sell signal with a circle. Of course the PMO predicted that signal 3 weeks earlier. Also worth noting is the new descending trading channel that has been established. It is annotated by the two blue lines. Unless we can break out of that channel we are in a downward trend. The next resistance should come at around 82.
Here’s what the Decision Point crew had to say about the SPY.
“The medium-term rising trend line drawn from the February low has been breached. After a major breakdown like we’ve had the past two days, it wouldn’t be unusual to see a snap back up toward that trend line. The next major area of support is the longer-term rising trend line drawn across the October 2014 and February low. The PMO still has plenty of room to fall before reaching oversold territory and volume was above average on a follow-up negative day. “
“The weekly chart went final today and it is very interesting. We see that price, though making new highs, was still staying within the rising trend channel. Resistance was met again and price pulled back. Support at the bottom of the rising trend channel is just above 1800. The weekly PMO has just had a negative crossover, generating a weekly PMO SELL signal. The PMO is rather flat and noisy, so the crossover is somewhat suspect.”
“Short-Term Indicators: We’ve been waiting for these indicators to get oversold. Today in climactic fashion they bolted for oversold extremes. I opted to pull up a 2 year chart versus a 1 year chart so that I could annotate oversold extremes. These indicators are nearly all there. When these indicators turn up, it will be time to reevaluate whether the correction is finished, at least in the short term.”
“Conclusion: Short-term indicators have just about reached the bottom of oversold territory and could reflect that a snap back or digestion phase is in the works. The weekly chart shows that price could be headed to the bottom of a long-term trend channel around 1800. Indicators support more downside, but as I noted above, short-term indicators are getting very oversold and when they hit bottom, they will be ready to unwind.”
I’m done speculating. The charts say we are in a short term down trend and when this ends, I will reenter equities if the coast is clear. The longer the downtrend the easier it will be to get back in, so don’t panic if there’s more selling. Embrace it! That’s all for this week. Prayerfully, with God’s help the rest of the year will be better. Have a nice weekend and I’ll see you on Monday.
God bless,
Scott
