Good Evening,
We got a bounce today which keeps us in the game for December. The energy and health sectors led us higher. All in all, it’s just more of the choppy on again off again action that we anticipated for the month. Our TSP and AMP allotments both posted small to moderate gains on the day.
Energy leads Wall St higher; Dow sets record
The day’s action left us with the following signals: C-Buy, S-Neutral, I-Buy, F-Buy. We are currently invested at 50/C, 50/I. Our allocation is now -0.59% for the year not including today’s gains. Here are the latest posted results:
| 12/01/14 | |||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 14.5908 | 16.7591 | 27.0472 | 35.3948 | 25.1881 |
| $ Change | 0.0009 | -0.0082 | -0.1849 | -0.5453 | -0.0725 |
| % Change day | +0.01% | -0.05% | -0.68% | -1.52% | -0.29% |
| % Change week | +0.01% | -0.05% | -0.68% | -1.52% | -0.29% |
| % Change month | +0.01% | -0.05% | -0.68% | -1.52% | -0.29% |
| % Change year | +2.13% | +6.46% | +13.29% | +5.12% | -1.47% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 17.4335 | 22.9326 | 24.8554 | 26.4296 | 15.0047 |
| $ Change | -0.0244 | -0.0819 | -0.1184 | -0.1506 | -0.0960 |
| % Change day | -0.14% | -0.36% | -0.47% | -0.57% | -0.64% |
| % Change week | -0.14% | -0.36% | -0.47% | -0.57% | -0.64% |
| % Change month | -0.14% | -0.36% | -0.47% | -0.57% | -0.64% |
| % Change year | +3.67% | +5.22% | +5.95% | +6.42% | +6.69% |
Let’s take a look at the S Fund today. (Chart Courtesy of Stockcharts.com)
The S Fund is still giving a neutral signal, but only by the skin of its teeth. Only a slight rebound of the Williams %R, which is an ultra short term indicator, prevented a sell signal as the PMO completed the negative crossover of its EMA that we anticipated yesterday. When signals are on the line like this they are always subject to a whipsaw or a sudden reversal in price. This type of reversal is the reason that our allocation is not 6% higher in 2014. As those of you who have been with us know, we got caught up in three such price reversals earlier this year. However, by utilizing shorter indicators we were ready for a fourth one in October and out-performed the major indices as we normally do. I spent many hours writing about the reasons for these reversals. If you are so inclined, you can check in the archives and read up on the subject. Suffice it to say, when price is on the line you must always be vigilant for such market behavior. Especially when you have the Central Banks involved!
Small caps have been exhibiting some weakness as of late which is shown in the chart above. I have sold all my positions in small caps and have taken some semi defensive action in that I have concentrated those funds in large cap indices such as the DOW and the S&P 100. Unfortunately, we have a lack of options in TSP which restricts our current investments to the C And I Fund. However, I need to explain that the Thrift program is devoid of such options as the Russell 2000 which is purely small caps. In an effort to minimize risk, the Thrift Board has limited small cap exposure in TSP to a small cap blend which is a blend of small cap and mid cap stocks (The S Fund). Nevertheless, it is best to limit small cap exposure as much as possible when anticipating some downside or when the market becomes extended. The reason for this strategy is that while small caps give you excellent gains in an up-trending market, they also fall at a rapid rate when the market declines. To describe the S Fund, I have often used the analogy that being invested in the S Fund is like taking an elevator up, but jumping out of a window to come down. You definitely want to be in it going up, but you don’t want to be anywhere near it on the way down. All that said, a lot of thrift players have gone strictly 100% S Fund in recent years. With the FED-induced perma-rally, it has been very good to them. Also, given all the recent reversals, it has really worked out good for them to buy and hold this fund. But take notice: if you are anticipating some possible downside in the market, it is best to move to the C Fund to minimize your losses when the actual downturn comes. You will give up some short-term gains to be sure, but you will also save yourself the pain of some deep losses when/if that serious downturn comes.
For now, we’ll stay the course as I anticipate choppy trading through the year end with some small gains to be captured along the way. Keep watching your charts and be ready to move when the time comes! That’s all for tonight. May God continue to bless your trades and don’t forget to thank Him for protected your funds for another year! Have a nice evening and stay warm.
God bless,
Scott
