10/13/14

Good Evening,

More selling. We called it here so you shouldn’t be surprised. Today’s excuses were everything from ebola to the European economy. I’ll give them an assist, but we’re saying here that the market was overextended and is making up for lost time now that most of FED safety net is gone. That’s my story and I’m sticking to it. The why is always interesting, but it’s the what that’s important and right now the what is that we are in a downward trend and we must respect it.

The thing I always like about RevShark, and probably because I learned a lot of my investing strategy from him, is that we often say the same things in different words. Recently, I have been talking about our strategy in a down turn and today I noticed that RevShark is talking about the same thing. It is important to know what your strategy/system is in a correction and stick with it. If handled correctly, this is where the money is made (or lost). Here is what he had to say:

Rev Shark

“In a correction it is very important to remember the first rule of holes which is if you are in one then stop digging. Corrections are actually quite enjoyable and should make you optimistic if you positioned correctly. Unfortunately too many folks try to fight the trend and they end up with a steady of supply of losses as they hold too much long inventory. When the market is poor you have to stop digging for stock picks and just wait it out. When the turn comes you can make it back very quickly and if you have kept accounts near highs you will outperform.

Be prepared to hear lots of talk about whether this correction is over or not. There is no clear evidence that the trend is about to shift but it is the nature of Wall Street to play the bottom calling game. It is more about seeking attention than actually making money.
You don’t make the big money by calling market turning points. You make the big money by riding trends aggressively when they occur. Trends produce huge percentage moves while you are lucky to catch just a few points when trying to call turning points.
What we want to do is be ready to catch uptrend when it emerges. You don’t need to be fully invested at the exact low to do that. In fact if that is your goal is very likely to incur substantial losses while trying to play that game.”
The day’s action left us with the following signals: C-Sell, S-Sell, I-Sell, F-Buy. We are currently invested at 100/G. Our allocation is now -5.77% not including today’s results.
10/10/14
Fund G Fund F Fund C Fund S Fund I Fund
Price 14.5458 16.6506 25.0324 32.4181 23.8319
$ Change 0.0009 0.0154 -0.2883 -0.5914 -0.3858
% Change day +0.01% +0.09% -1.14% -1.79% -1.59%
% Change week +0.05% +0.69% -3.09% -4.76% -2.96%
% Change month +0.06% +1.00% -3.29% -4.85% -5.78%
% Change year +1.81% +5.77% +4.85% -3.72% -6.78%
  L INC L 2020 L 2030 L 2040 L 2050
Price 17.1301 22.0541 23.6546 24.969 14.0815
$ Change -0.0438 -0.1533 -0.2152 -0.2655 -0.1713
% Change day -0.26% -0.69% -0.90% -1.05% -1.20%
% Change week -0.59% -1.65% -2.17% -2.54% -2.89%
% Change month -0.73% -2.13% -2.77% -3.22% -3.69%
% Change year +1.86% +1.19% +0.83% +0.54% +0.13%
There’s a lot of crying out there right now, but think of this, even after all this selling the S&P 500 is off less than 7%. A real correction is -10% or better.

Lets take a look at the C Fund tonight. Chart courtesy of Stockcharts.com.
Resistance has now been broken at 1905 with new resistance set around 1850. The 20 EMA has now crossed through the 50 EMA and is threatening the 100 EMA which is bearish. The PMO is in over bought territory, but is showing no sign of slowing. Volume was above average which is also bearish. The Williams %R has bottomed out as it is an ultra short indicator. It will be the first one to turn up when a bottom is found. Everything about this chart is bearish, period. Sell, Sell, Sell!!!
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I still think that this is a correction of the 10% variety and that a rally back to previous highs will occur beginning in early November. After that, it’s hard to say. My guess is that the next sell off will be started by higher interest rates. Worth noting is that a lot of people are going to bonds now, which are working at the moment, but I have said here that will not be the case when rates head up. That’s the reason, I favor cash or defensive stocks at this time. We just don’t know when the bottom will be pulled out from under bonds. Our strategy remains the same, to watch our charts for an uptrend and find a good entry point when one occurs. That’s all for tonight. Have a great evening!

God bless,

Scott8-)



Written By

Scott Grimes

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