Good Evening,
The sell off continued well into the triple digits in all of the major indices today. That makes day two of the current sell off. Dare I call it consolidation? I still think that stocks will regroup and hit new highs into the new year. They say oil is dragging the market down at this time and they are probably right. However, the key is not to try to anticipate what is happening but to react quickly to whatever does happen. I have repeated this over and over again, but it is very important to success in the market this year. Most of us learned this the hard way. There is simply no other choice. You cannot time this market by using macro-economic issues, media, or big picture arguments. Neither can you use such strategies as contrary thinking. None of it works. The only way to negotiate this market is to embrace the idea that we are in an uptrend and stay with it until something changes. That means that you have to stare this bear in the eyes and not blink! As I have preached and preached, eventually this will come to an end, but if you stay with the trend to that end you will have enough gains to cover your exit. In a nutshell, that is what we do…
Not that I like the market going down while I am in it, but today’s sell off was good in that it relieved some of the pressure being created by the extended conditions. Even a little more selling wouldn’t hurt. That said, I am not, nor have I ever advocated the buy-and-hold approach. Traditional Wall Street will scoff at me, but I don’t care. If the market sells off enough to generate sell signals on my charts then I will sell and call it a day. Buying and holding is the worst philosophy that can be used. If you don’t agree with that then you’re probably reading the wrong commentary. Buy when you need to buy, and sell when you need to sell. Sell is not a dirty word here. We don’t hold anything and hope it will go up. We rely on THE LORD and our charts! The day did not go well. I only had a few things that were working and they were in AMP and not in TSP. TSP dropped back – 1.45% which was slightly better than the three major indices. The more defensively minded AMP pulled back only -0.59% which is only about of the third of what the major indices dropped. Remember, it’s not what you make, but what you keep that counts!
Indexes end down more than 1 pct as energy falls further
The day’s sell off left us with the following signals: C-Neutral, S-Neutral, I-Sell, F-Buy. We are now invested at 80/C, 20/S. Our allocation is now -0.90% and unfortunately that does not include today’s losses. Here are the latest posted results:
| 12/09/14 | |||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 14.5989 | 16.7364 | 27.1451 | 35.8956 | 24.8739 |
| $ Change | 0.0008 | 0.0175 | -0.0063 | 0.2924 | -0.1850 |
| % Change day | +0.01% | +0.10% | -0.02% | +0.82% | -0.74% |
| % Change week | +0.02% | +0.33% | -0.73% | -0.26% | -1.13% |
| % Change month | +0.06% | -0.18% | -0.32% | -0.12% | -1.53% |
| % Change year | +2.18% | +6.32% | +13.70% | +6.61% | -2.70% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 17.4433 | 22.9423 | 24.8717 | 26.4565 | 15.0185 |
| $ Change | -0.0009 | -0.0100 | -0.0103 | -0.0073 | -0.0066 |
| % Change day | -0.01% | -0.04% | -0.04% | -0.03% | -0.04% |
| % Change week | -0.12% | -0.37% | -0.48% | -0.54% | -0.63% |
| % Change month | -0.08% | -0.31% | -0.41% | -0.47% | -0.54% |
| % Change year | +3.73% | +5.26% | +6.02% | +6.53% | +6.79% |
Let’s take a look at the S Fund as it will be the next of our funds to generate a sell signal should things continue to go south. (Chart courtesy of Stockcharts.com)
Price has been repelled from upper resistance at 88.65. Support is set at 83. The fact that price closed below the 50 EMA is a little bearish. We are currently using a soft set of indicators to keep us from being whipsawed from all the cheap FED money. Normally, we would sell this fund if any three of the four major indicators (Price, PMO, MACD, Williams %R) are giving a sell signal. However, in lieu of the whipsaw situation that was created by all the cheap FED money I also required that all four indicators be in a negative configuration. However, I used a quicker reacting indicator in price in that I required the 5 EMA to pass through the 50 EMA for that sell signal rather than the 20 through the 50 as most technicians used. This adjustment allowed our timing model to side step any additional whipsaws. All that said, we have sell signals in the PMO, MAC-D, and Williams %R. Using our current set of indicators all we need for a total sell signal in the S Fund is for the 5 EMA to pass through the 50 EMA which would require about three more days or so of the price closing below the 50 EMA. Now for the opinion part of my analysis: Given the pattern that has yet to be broken in 2014, price will probably rebound strongly after 2 or 3 days of decline. It has been such a strong pattern that most traders are automatically buying all dips and they will continue to do so as long as it works!
