Good Evening, For the second day in a row, small-cap stocks were aggressively sold while the Dow hit new highs. Since the close on Friday, the Dow is up about 1.2% while the Russell 2000 ETF (IWM) is down 2.36%. This is rotation plain and simple. The major funds have decided to buy trade sensitive large cap stocks and are dumping small caps to do it. This type of rotation is not uncommon and is usually rectified in short order. If anything it will create good entry points into fundamentally sound small caps which investors will pursue aggressively in just a few weeks. A major index may out perform the other indices in that manner for a while but eventually they are all going to move in the same direction. In other words the other indices will eventually catch up. The same thing holds true on the way down too. So if another index is tanking you better keep a close eye on the one your in as well because it probably won’t be long until it follows suit. I this case you must be patient and wait for your turn to come.
The days trading left us with the following results: Our TSP allotment dropped -0.70%. For comparison, the Dow added +0.46%, the Nasdaq fell -0.47%, and the S&P 500 slipped -0.04%.
The days action left us with the following signals: C-Neutral, S-Neutral, I-Neutral, F-Neutral. We are currently invested at 100/S. Our allocation is now +8.18% on the year. Here are the latest posted results.
| 10/02/18 | Prior Prices | ||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 15.8727 | 17.8507 | 41.7095 | 52.8709 | 30.3343 |
| $ Change | 0.0013 | 0.0214 | -0.0154 | -0.3904 | -0.1427 |
| % Change day | +0.01% | +0.12% | -0.04% | -0.73% | -0.47% |
| % Change week | +0.02% | +0.02% | +0.33% | -1.59% | -0.64% |
| % Change month | +0.02% | +0.02% | +0.33% | -1.59% | -0.64% |
| % Change year | +2.14% | -1.46% | +10.90% | +9.09% | -1.69% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 20.1228 | 27.8207 | 32.2114 | 35.2515 | 20.5104 |
| $ Change | -0.0079 | -0.0190 | -0.0493 | -0.0668 | -0.0461 |
| % Change day | -0.04% | -0.07% | -0.15% | -0.19% | -0.22% |
| % Change week | -0.03% | -0.06% | -0.15% | -0.19% | -0.24% |
| % Change month | -0.03% | -0.06% | -0.15% | -0.19% | -0.24% |
| % Change year | +2.93% | +3.46% | +4.80% | +5.30% | +5.74% |
I’ll be the first to admit that we are definitely feeling some pain in the S Fund. However, as I mentioned in a recent post you can move to late in the game and cost yourself money on both ends. I have little doubt that the S Fund will our perform from late October through December but I definitely didn’t anticipated small caps selling off this hard due to a trade agreement with Canada. That’s my mistake and I’ll claim it and move on. Experience has taught me that it is better to hold in a situation like this rather than make a short term mistake that can cost dearly. Perhaps I’m wrong and the trade situation will keep large caps most notably the Dow Jones Industrial and the S&P 500 on top until the end of the year. If it happens then I’ll be surprised. We’ll have our day!! That’s all for tonight. Have a nice evening and may God continue to bless your trades.
God bless, Scott 
