Good Evening,
The market started the day with a gap down of almost 1%, but ended the session much higher. While the strong close was nice, the action has a different feel than it had during the previous downturns in 2014. I’m not saying that a strong bounce is not still in the future, but I am saying that we have had a few failed bounces now and given that we have a technically extended market, a higher level of caution is warranted. That said, our position in the C Fund generated a sell signal and then backed off of it early in the session. At that time, I issued an alert to sell our 40% in the C Fund. Since the C Fund is still only a weak neutral at best, I decided to wait until the Fund issues a solid buy signal before re-entering equities; consider it a small insurance policy. Also, since it’s the end of the month, we will have two fresh trades to work with on Wednesday should we need them. Better to play it safe now than to burn one of our two trades for October right off the bat. As far as AMP, we are still carrying a high level of cash, but are not liquidating any more of our positions at this time, as all those charts are still strong. Remember, the range and quality of investments that we have in that program are superior to TSP.
U.S. Stocks Decline, Following Drops Overseas
The day’s action left us with the following signals: C-Neutral, S-Sell, I-Sell, F-Buy. The F Fund did manage a buy signal today, as bonds have been prospering in the recent downturn. We will try to stay away from bonds at this time for two reasons: #1 The FED is ending its Bond buying program, and #2 Higher interest rates are almost surely in the future and the last place you want to be if they raise rates is in bonds. As I mentioned earlier, we sold our position in the C Fund and will take a wait-and-see approach to the current dip. I still believe there will be a rally into December that will start sometime in October or early November. Of course, we will wait for our charts to tell us what to do. Our allocation is now -5.75% on the year, not including today’s results. Here are the latest posted results:
| 09/26/14 | |||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 14.5331 | 16.468 | 26.0177 | 34.4888 | 25.4289 |
| $ Change | 0.0008 | -0.0296 | 0.2258 | 0.2850 | 0.0310 |
| % Change day | +0.01% | -0.18% | +0.88% | +0.83% | +0.12% |
| % Change week | +0.04% | +0.23% | -1.34% | -2.24% | -2.20% |
| % Change month | +0.15% | -0.69% | -0.88% | -3.93% | -3.30% |
| % Change year | +1.72% | +4.61% | +8.97% | +2.43% | -0.53% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 17.2733 | 22.604 | 24.4307 | 25.9285 | 14.7056 |
| $ Change | 0.0220 | 0.0725 | 0.1014 | 0.1255 | 0.0799 |
| % Change day | +0.13% | +0.32% | +0.42% | +0.49% | +0.55% |
| % Change week | -0.30% | -0.87% | -1.14% | -1.33% | -1.52% |
| % Change month | -0.32% | -1.06% | -1.42% | -1.69% | -1.94% |
| % Change year | +2.72% | +3.71% | +4.14% | +4.41% | +4.57% |
We liquidated our position in the C Fund today. Here’s what it looked like: Chart courtesy of Stockcharts.com.
The C Fund briefly penetrated lower resistance today, but rebounded short of the previously established upward trading channel closing on its 50 EMA. While this chart doesn’t have any serious technical damage, it is starting to show some stress as the 5 EMA is approaching the 50 EMA and will make a negative crossover if price remains below the 50 EMA. The PMO continues to fall and can accommodate a lot more downside before it becomes extended. The MAC D also continues down in negative territory and the Williams %R has turned back down. This chart is rated at neutral but could easily change to a sell signal with another weak day of action.
As I said earlier, we will take a defensive wait-and-see approach until the action breaks one way or the other. There are a lot of things that are troubling about this market right now. For instance, the number of stocks making new lows is much larger than those making new highs. This is what we would expect from a market nearing its bottom, not one that is just off of fresh highs. Secondly, many small caps have already entered bear market territory in that they are trading 20% or more off their highs. Sooner or later this is a market that will break, but we must make sure that we don’t let our emotions enter into our trading decisions. If we listen to our charts, we will be carrying a large amount of cash when the “big one” comes. A lot of folks keep asking me if this is it. I tell them that I don’t think so, but isn’t it nice to know that I have my charts to sort it all out for me! And you all know that I have to add that isn’t it even nicer to know that I have my God to guide me. May He continue to bless your trades! Have a nice evening.
God bless,
Scott
