Good Evening,
Not to sound too bearish, but the market struggled again today with the overhead resistance that we have been talking about in recent newsletters. The news media focused on the Dow, which is a worthless indicator as to the overall health of the market. They also lauded the fact that the S&P 500 and Nasdaq were up as well. None of these things accurately reflected what was going on in today’s market. Again, not to sound overly brearish, but all four of the dips we had this year started with under performing small caps. Guess what under performed today? Small caps. The Russell 2000 dropped a sizable -0.85%. That’s a far cry from the +0.23% that the Dow clocked. And what about breadth? The NYSE had a ratio of 1.82 losers to every gainer. The Nasdaq which gained +0.11% was even worse: 1800 losers to only 893 gainers for a ratio of 2.02 to 1.00. Talk about weighted. That doesn’t sound near as good as saying that the Dow, S&P, and Nasdaq were all up, does it?
Am I saying the sky is falling? No. I am saying that now is the time to stay vigilant. We need to watch our charts and reduce our exposure if things start to go south. We have been looking for signs of weakness and this could be one. It could also just be some consolidation before another run up. As reactive traders, we must be ready to react to what the market gives us and we will see that in our charts!
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 -0.82% on the year, not including today’s results. Here are the latest posted results.
| 11/12/14 |
|
|
|
|
| Fund |
G Fund |
F Fund |
C Fund |
S Fund |
I Fund |
| Price |
14.5763 |
16.6322 |
26.8156 |
35.83 |
24.8184 |
| $ Change |
0.0017 |
0.0069 |
0.0080 |
0.1544 |
-0.0187 |
| % Change day |
+0.01% |
+0.04% |
+0.03% |
+0.43% |
-0.08% |
| % Change week |
+0.03% |
-0.15% |
+0.35% |
+0.77% |
+0.60% |
| % Change month |
+0.07% |
-0.07% |
+1.13% |
+1.02% |
-1.25% |
| % Change year |
+2.02% |
+5.66% |
+12.32% |
+6.41% |
-2.92% |
|
L INC |
L 2020 |
L 2030 |
L 2040 |
L 2050 |
| Price |
17.388 |
22.8301 |
24.7308 |
26.2948 |
14.9211 |
| $ Change |
0.0042 |
0.0091 |
0.0136 |
0.0183 |
0.0112 |
| % Change day |
+0.02% |
+0.04% |
+0.06% |
+0.07% |
+0.08% |
| % Change week |
+0.11% |
+0.26% |
+0.33% |
+0.38% |
+0.44% |
| % Change month |
+0.15% |
+0.23% |
+0.29% |
+0.34% |
+0.35% |
| % Change year |
+3.40% |
+4.75% |
+5.42% |
+5.88% |
+6.10% |
Lets keep an eye on the S&P. (All charts courtesy of Stockcharts.com)
I really don’t see anything here to panic about just yet. So far, price is doing exactly what our analysis said it would do. It is moving sideways, out of the established trading channel, slowing its rate of ascent. At this time I would consider it consolidation, as long as it does not move below support at 2020. The PMO has reached resistance and price was repelled right on cue. All this we anticipated. How the price will move from here is pure conjecture. The real test is the resistance line at 2020. Should that be penetrated you will know that it is probably time to book some profits. That, if you will, is the line in the sand….
I know some of you are 100% S Fund. You always are….. So that you won’t worry too much, here’s what the S Fund looked like today. As you can see, it still has a little room to run. Like the C Fund, it has also slowed its rate of ascent. I have drawn a new trend channel. As you can see price tested the lower trend line. The first sign of significant weakness to look for here would be if price penetrates the lower trend line. If price remains within the newly established trading channel, it will soon encounter resistance set at around 88.70. One more thing to keep an eye on: The PMO started to flatten out a bit today. I would consider it bearish if it turns down.
Conclusion: Nothing is broken yet. But it is bending. Consolidation always bends the chart. It is a real dip or decline that breaks it… In essence, we watch the consolidation to make sure that it doesn’t turn into correction.
All that said, I wouldn’t blame anyone who is sitting on considerable profits if they booked a few at this point. However, I do not think it is necessary to go fully defensive yet. Keep watching the charts and keep praying that God will guide our group. May He continue to bless your trades. That’s all for tonight. Stay warm, it’s getting cold out there… No wisecracks from my friends in South Florida!
God bless,
Scott
