10/10/14

Good Evening,

Within our system we have various quotes that we use to sum up what we’re about. Our most famous quote is “It’s not what you make but what you keep”. Tonight I am going to add a new one to our archives. Sometimes a simple expression can go a long way toward keeping you on the proper path and I think this saying is important as the market returns to normalcy. Here it is “Listen to your chart, not to your heart” . This week is a good example of why it is important not to get sucked into a bad trade by your emotions. Monday was a really bad day followed by one of the best days of 2014 on Tuesday. The market pundits proclaimed that the V-Shaped bounce had returned to again punish prudent defensive minded traders. After all, they had been crying wolf for some time. So, many traders piled on pushing stocks back up yet again. Our hearts told us that we should be in on this action, that we were being left behind, but our charts said other wise. We made the tough choice to follow our charts and not our hearts. The next day’s result was the worst trading day of 2014 and a fourth failed bounce. Now it is Thursday, the day after that horrendous day of trading, our hearts are saying go ahead get back into the market, you are being left behind…..but, our charts are saying not so fast. And the result? More downside, unprecedented given the past five years of action. Yes, we must listen to our charts and not our hearts, the charts are not powered by emotion and most of the time they are right! I keep thinking of that old song from the 70’s “I can see clearly now”. I have my own version…..”I can see clearly now, the FED is gone!”  I say again, this downturn is what we need to make money!!!!!

 
As you know by now the market closed again with triple digit losses in the Nasdaq and the S&P with the Dow not far behind posting a drop of -0.69% . Our allocations fared well with TSP picking up its G Fund micro-gain and AMP posting another small gain on the day to close out the week with an overall gain of +0.33%. If you think the Lord has not blessed us, then consider this, the Dow closed out the week down 2.7%, the Nasdaq fell a whopping 4.5%, and the mighty S&P lost 3.1%. And that’s the major indices, if you were in small caps it was far worse. Give Him all the praise for He is worthy!!!
The week’s action left us with the following signals: C-Sell, S-Sell, I-Sell, F-Buy. With God’s guidance we are currently invested at 100/G. Our allocation is now -5.77% on the year, not including today’s results.
10/09/14 Prior Prices
Fund G Fund F Fund C Fund S Fund I Fund
Price 14.5449 16.6352 25.3207 33.0095 24.2177
$ Change 0.0009 -0.0009 -0.5324 -0.8027 -0.5640
% Change day +0.01% -0.01% -2.06% -2.37% -2.28%
% Change week +0.04% +0.60% -1.97% -3.03% -1.39%
% Change month +0.06% +0.91% -2.17% -3.11% -4.25%
% Change year +1.81% +5.68% +6.05% -1.96% -5.27%
  L INC L 2020 L 2030 L 2040 L 2050
Price 17.1739 22.2074 23.8698 25.2345 14.2528
$ Change -0.0747 -0.2509 -0.3487 -0.4264 -0.2732
% Change day -0.43% -1.12% -1.44% -1.66% -1.88%
% Change week -0.34% -0.97% -1.28% -1.51% -1.71%
% Change month -0.47% -1.45% -1.88% -2.19% -2.52%
% Change year +2.12% +1.89% +1.75% +1.61% +1.35%
Remember what I said about those gains being erased yesterday? Well, you can take another chunk off of that today! The I Fund actually entered bear market territory today. Let’s take a look at the chart courtesy of our friends at Stockcharts.com.
The first thing you need to know about this chart if that the S Fund is not behind it. I wrote about the fact that the European Markets would be a drag on the US market before this ever started. That theory came to fruition. The next thing I pointed out was how this fund would probably enter into bear market territory. Well it has. It is pulling the other charts/markets along with it. The hierarchy goes like this: The I Fund is being followed by the S Fund and the S Fund is being followed by the C Fund. European Markets >US Small Caps> The S&P 500/Dow. The worse the I fund gets, the more the others will follow. I annotated the chart so it should be self explanatory. I will point out again that the 50 EMA crossing the 200 EMA is the reason that we consider this a bear market chart. Down and down it goes and where it stops nobody knows…
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Don’t be discouraged. So far this is nothing but healthy action that will reset the market and create a good entry point for us to take advantage of the next rally. Our job right now is to closely watch our charts for the bottom and subsequent upturn in this market. It may come soon and it may be a while, we must remain patient and we will make a nice profit when the time comes. May God continue to guide our hand! Give Him all the praise! Have a nice weekend. It’s going to be a rainy one here. It looks like I’ll stay in and watch some football so Go Cats, Go Herd, and Go Mountaineers!

See you Monday.

God bless,

Scott8-)



Written By

Scott Grimes

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