Good Evening,
There was just not a lot of movement today. I think I fell asleep about a half dozen times watching my charts or was it paint drying? There are a lot of people saying that the market is topping. I say good luck timing that. James DePorre (RevShark), described the situation very well in some of his comments today. Since I cannot say it any better, I will post a little of what he said here. Of course if you like it, he has a website for the serious investor at Sharkinvesting.com. Here is what he had to say:
“When a market is going straight up the natural inclination of many traders is to try to call a top. Active market players have strong desire to be the market timing genius that nails the precise moment that a trend has come to an end. It is understandable to try but is it smart? In theory you should be able to make a ton of money if you can do this with some precision but the reality is that it is usually more an exercise in ego that doesn’t produce big profits. What happens when people engage in this game is that they rack of a series of losses as they are stopped out and try again. The tendency is to justify the behavior by saying ‘I was just a little early but this time I’m going to nail it’. If you try long enough you will eventually be right but what we never hear about is how much money was lost in the process. Would you have better off simply staying with the trend and only selling once there was some weakness? In addition to the cost of losses on premature shorts there is another hefty price which is the profits lost on not sticking with the trends. It is hard enough to keep pace with the market trend when you are long, it is just plain impossible when you are obsessed with trying to call a market turn. The combination of being on the wrong side of the market along with the opportunity cost of premature shorts should give pause to anyone who is trying to time market turns. If you don’t try to time market turns how do you protect yourself when the inevitable top does occur? First and foremost you react quickly. When cracks appears you take defensive steps. You will likely still suffer some losses but in many, if not most, cases the profits you book by staying with the trend will provide you a decent cushion. Typically you will make some good money in the late stages of a market run and that will more offset the hits you take when things shift. The bears will always be early and will have to make up some good size losses before they can enjoy the profits of calling a top. One of the problems with the anticipatory method of dealing with the market is that there will be mistakes when you react quickly to subtle signs of weakness. You can never be sure that weakness is a signal of a significant turn. This market has been particularly brutal in shaking out those who react quickly to minor signs of weakness.”
If you have been reading me for a while, you may say that this sounds a lot like what we do. Well it is, I learned a lot of what I know from James DePorre and thus, my trading style is very similar to his. I feel that he is one of the best traders out there period. At any rate that is what we are doing sticking with the trend as long as we can. I agree totally with what he said about the profits from staying in the market covering any losses that you might incur when you are finally exposed to some weakness. In a nut shell that is what we do. Sell is not a dirty word in our system. That said, we don’t sell until we see some signs of weakness. That is the difference between a market timer and a prudent trader that invests with the trend.
The slow action today led to small gains in both TSP and AMP. Small gains are fine as long as they are new and we are still hanging on to our old ones. May God be praised!
Dow, S&P 500 set record highs in light volume
The day’s action left us with the following signals: C-Buy, S-Buy, I-Neutral, F-Neutral. We are currently invested at 30/C, 70/S. Our allocation is now -1.13% on the year not including today’s results. Here are the latest posted results:
| 11/10/14 | |||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 14.5746 | 16.6253 | 26.8076 | 35.6756 | 24.8371 |
| $ Change | 0.0026 | -0.0325 | 0.0852 | 0.1198 | 0.1660 |
| % Change day | +0.02% | -0.20% | +0.32% | +0.34% | +0.67% |
| % Change week | +0.02% | -0.20% | +0.32% | +0.34% | +0.67% |
| % Change month | +0.06% | -0.11% | +1.10% | +0.58% | -1.18% |
| % Change year | +2.01% | +5.61% | +12.28% | +5.95% | -2.85% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 17.3838 | 22.821 | 24.7172 | 26.2765 | 14.9099 |
| $ Change | 0.0145 | 0.0492 | 0.0674 | 0.0818 | 0.0535 |
| % Change day | +0.08% | +0.22% | +0.27% | +0.31% | +0.36% |
| % Change week | +0.08% | +0.22% | +0.27% | +0.31% | +0.36% |
| % Change month | +0.13% | +0.19% | +0.23% | +0.27% | +0.27% |
| % Change year | +3.37% | +4.70% | +5.36% | +5.81% | +6.02% |
Here’s what the C Fund looked like today. (Chart Courtesy of Stockcharts.com)
As I pointed out yesterday, the lower trend line is being challenged. It is unlikely that the current rate of ascension will continue. Price is now starting to slow its angle of ascent. Volume is also decreasing. We will watch carefully to see it that trend continues. Lower volume can sometimes signal a coming top. However, today’s lower volume was probably just a function of Veterans Day.
At this time, the market looks to be consolidating its gains. I expect what traders often refer to as a slow melt up, but be vigilant for signs of weakness. Most of our charts are very extended.
That’s all for tonight. A special shout out to all you Veterans. Thank you for your service and may God truly bless you and yours. We are all free to trade because of your sacrifices!
Have a nice evening.
God bless,
Scott
