Good Evening,
Declining markets often require the most skill to trade. As the market moves lower, establishing a descending trend, it will experience counter trend bounces. These counter trend bounces are deceiving in that they are almost always bigger and more robust than those that occur during a bull market. They often suck traders in who mistakenly think that the down trend has ended, that the market has bottomed and is ready to turn up, only to see it start dropping again in the next session or so. That is the reason that a rule of thumb for a down trending market is to sell into strength. Experienced traders do this without fail, resulting in the market continuing to descend. The thing that makes this particular market even more deceiving is that we are coming off a five year period when it was a losing proposition to play defense. Those of us that were accustomed to taking such prudent trading were forced to temporarily adopt more of a buy and hold philosophy during this period of artificial market stimulation. Meanwhile a whole new group of traders came along that become accustomed to this type of trading and considered it to be normal. Which brings us to today’s market in which they will have to adapt or lose a significant percentage of their portfolio every time the market corrects. If you are one of those folks, believe me when I tell you that the market will correct. Don’t pay attention to the fact that the market has failed to undergo a true correction defined as a drop of 10% or more from the market highs during the past three years. I say again, that is due to the FED’s quantitative easing program that is now coming to an end. Corrections are and will be a part of a normal, healthy market and you must learn how to play them. The rules are simple. Sell into strength and don’t take long positions in counter trend bounces until a new trend is established. This likely means that you will sit on the side lines with a great deal of cash and watch a bounce are two go by until a new trend is established. However, if you took proper defensive action to start with, you will be miles ahead of those folks that did not when you re-enter the market. In other words, you can afford to play it safe.
We experienced a nice bounce today. Is it the beginning of a new rally? Is if the bottom? There will be those that will proclaim that it is. There always are. They are media types that are seeking glory and ratings and there will always be some of them that will be correct. You’ve heard the old saying “Even a blind squirrel will get a nut every now and then”. Well that’s what happens in this case. The ones that are right when the market turns up are usually wrong several preceding times as they attempt to call the bottom. After all, it’s not their money that they are losing when traders take a long position on their advice and the market continues to go down. That is the approach that will lose you half your portfolio, after which you will spend months or years making the money back while those who took defensive positions are turning a profit. Remember another old saying ‘Time is money and money is time’! Unless you are day trading, stay away from the counter trend bounces until you know for sure that the market is heading back up. Also remember, sell is not a dirty word!!!!
Our TSP allotment held steady today and the AMP program sold into strength and locked in a +0.69% profit. TSP and AMP are both off their highs, but are sitting on high cash levels and ready to profit during the next rally! Thank God for His divine providence in guiding our hand!!
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% on the year not including today’s results. Remember, the Thrift Offices were closed on Columbus day so nothing updates until tonight.
| 10/10/14 |
|
|
|
Prior Prices |
| 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% |
Lets keep an eye on the C Fund. Chart courtesy of Stockcharts.com.
The C Fund chart is getting ugly and it’s the best of our equity based charts. Most notable today is that it continues to trade below its 200 EMA. If it remains in this range, it will draw the 20 EMA further toward the 200 EMA. If that crossover were to occur it would make this a bear market chart. The I fund has already made such a crossover and our domestic charts are, thus far, following its course. Although the major indices bounced today, the bounce was weak at best and does little to inspire confidence that this market is going in a new direction. The fact that the PMO continues its free fall on all our equity based charts is bearish. You can see below that it is not even giving a hint of turning up at this time. Also of concern is the fact that price remains the the bottom of the descending trading channel and will likely encounter resistance at 1850 before it turns up. The Williams %R which is an ultra sensitive short term indicator remains in negative territory favoring more downward action. It did turn up slightly. However, this particular indicator normally moves up strongly with even the slightest momentum in the right direction. Overall this chart remains extremely bearish and favors more downside.
Not much to add here tonight. We have a downward trend and we are now as defensive as we can get. At this time we’ll stay put and wait for the market to make its next move, which I believe will come within the next three to four weeks. I will be very surprised if we do not see some more selling at this point. All in all, though, this is making for a good buying opportunity in the future. We just have to remain vigilant and patient. That’s all for tonight. Have a great evening and may God continue to bless your trades!
God bless,
Scott
