Good Evening, Small caps continued to be pressured today as the Russell 2000 ETF (IWM) gave up another -0.27% slicing down through it’s 50 day moving average in the process. Why is this important? It reflects the true nature of whats going on in the market. In contrast the major indices are not reflecting the true health of the market. The reason for this is simple, they are being propped up by a few big cap stocks. Eventually those stocks will decline and catch up with the mid and small cap stocks which haven’t been doing anything for a while. When they do you can bet that the media will be crying the blues. So the question at this point or perhaps to be more accurate at that point will be if the smaller cap stocks will start to move back up or is this the beginning of something bigger. Actually, that is the question that we always ask ourselves when the market arrives at this intersection. What I am referring to is that small caps always lead the way down and then lead the way back up. Again, the question at that point is will the small caps start a new up trend or will we be in for a correction defined as a dip of 10 percent or more or perhaps will it even be worse? No one has a crystal ball. However, there are a few things you can look at starting with the indicators on the charts for the C and S Funds that I mentioned a few nights ago. For the sake of time I won’t regurgitate them here again. You can find them in the archives. In addition to those you must consider recent market patterns when trying to assess current market conditions. Market patterns always persist until the are broken and the current pattern of mini corrections in the 3 to 5% range has been going on for over a year. Also consider that this is the strongest season for the market. The average returns for November and December have been phenomenal ever since they have kept records. So will I make a prediction? Not really. As you all know that’s not really what I do. I am a reactive trader and I react to the action that I see before me on the charts. That said, I will say this. Given the aforementioned facts I would expect This to be a shallow pullback and that stocks will then continue to rally into the new year. So since I’m a reactive trader why is it important for me to even consider stuff like seasonality? I’ll tell you why. By considering those factors I know to keep from selling my positions as long as the charts will allow me to hold them. In other words, I know that the likely hood for the market to whipsaw and head back up is much higher than say it would be in August or when the market is in a pattern of undergoing regular corrections of ten percent or more. You get the picture? Technical analysis is not a crystal ball. Remember, nobody has one of those. It is more like a windsock that will allow you to manage your risk. In conclusion right now the odds are that the market will continue higher after a brief rest. However, if the the trend of mild dips for the past year is broken then you might seriously consider selling…..

The days trading left us with the following results:  Our TSP allotment fell back -0.25%. For comparison, the Dow dropped -0.13%, the Nasdaq -0.29% and the S&P 500 -0.23%.

The days action left us with the following signals: C-Neutral, S-Neutral, I-Neutral, F-Sell. We are currently invested at 100/S. Our allocation is now +14.50% on the year not including the day’s results. Here are the latest posted results:

God bless, Scott 

 

 ***Just a reminder that you can review the performance of our allocation at the Web Site TSPTALK.com in the autotracker section under the screen name KyFan1.

 

 

I produce and publish this blog as both a ministry and for the benefit of any Federal Government Employee. This is done to offer you some guidance as to how to approach your retirement more financially successful. When it is time for you to retire, I recommend you utilize the services of a Professional Money Manager, who works with a reputable investment firm. He understands the guidance you have already received and he can manage your savings assets utilizing a more advanced investment program into the future. 

 

If you would like to receive more information about this introduction, please feel free to contact me at  [email protected].