03/06/2015

Good Evening,

I was wrong; the jobs report came in much better than expected this morning. Traders decided that the good news was in fact bad news as they surmised that it would lead to a FED rate increase and you already know the rest. The market sold off, causing some technical damage to our charts. We’ll look at those in a minute. Let’s stay on task for now. The question we have to ask ourselves: is this more consolidation or is this a top forming? Unfortunately, there is no simple answer to this question. If there were, then more than 15% of fund managers would have performed as well as the S&P 500 in 2014. Did I tell you how glad I am that year is over? Anyway, let’s take a look the facts. While the market has been a bit oversold, that is no longer the case. Also, February through March is the strongest period for the market seasonally. We still have the positive influence of cheap oil putting a lot of money back in the pockets of the consumer. Although they haven’t spent it yet, they will. So what! if they raise interest rates! We are still at historic lows. It’s not like we are going from near zero to 10% in one day. How about unemployment? With unemployment at just 5.5% we now have more people back to work than we have had in quite a while. What’s not to like about this economy? Yes, I’m laying fundamentals out and I’m a technical analyst, but fundamentals do have their place. In this case, they support our charts not having sell signals just yet. Let’s see how much damage the day’s trading actually did…

Our TSP allotment slid back -1.34% and AMP dropped -1.228%. For comparison the Dow (Apple will replace AT&T in this index later this month) lost -1.54%, the Nasdaq -1.11%, The S&P -1.42%, AT&T was -1.53%, Alaska Air Group -1.41%, Facebook -1.48%, and Apple gained +0.15%. I thank God the sell off wasn’t worse and also that we gained enough in the last month to keep us floating through this dip!

 

 

Wall Street ends lower as jobs data may bring rate hike sooner

 

 

 

The day’s action left us with the following signals:C-Neutral, S-Neutral, I-Neutral, F-Neutral. We are currently invested at 30/C, 34/S, 36/I. Our allocation is now +1.22% for the year. Here are the latest posted results:

03/06/15
Fund G Fund F Fund C Fund S Fund I Fund
Price 14.6656 16.832 27.4398 37.3845 25.4923
$ Change 0.0007 -0.0993 -0.3909 -0.4848 -0.2340
% Change day +0.00% -0.59% -1.40% -1.28% -0.91%
% Change week +0.03% -1.01% -1.53% -1.05% -1.85%
% Change month +0.03% -1.01% -1.53% -1.05% -1.85%
% Change year +0.34% +0.18% +1.01% +3.00% +5.26%
  L INC L 2020 L 2030 L 2040 L 2050
Price 17.5823 23.2442 25.2655 26.9283 15.3108
$ Change -0.0501 -0.1538 -0.2148 -0.2633 -0.1669
% Change day -0.28% -0.66% -0.84% -0.97% -1.08%
% Change week -0.35% -0.83% -1.06% -1.20% -1.34%
% Change month -0.35% -0.83% -1.06% -1.20% -1.34%
% Change year +0.75% +1.51% +1.85% +2.08% +2.35%
Now, let’s look at those charts.

C Fund: Price broke support at 1990 so the next downside target (which I neglected to mark) is around 1990 and after that 1973. This chart is now on a neutral signal as three of our four indicators (PMO, MAC D, Wms%R) are in negative configurations. There’s no panic just yet though, as the 20 EMA is still has a great deal of separation from the 50 EMA. It will take a lot of additional negative pricing action before the 20 EMA will drop through the 50 EMA and trigger an overall sell signal. As they say, a lot can happen between now and then.

1
S Fund: Price dropped out of the ascending channel but is still trading well above its 50 EMA so there’s no danger of a sell signal here. However, the other three indicators all are giving sell signals so this chart is now neutral. As usual the signals are marked by green circles. This chart is still in decent shape and looks to be just a little oversold. My current downside target for this dip is 89.
2
I Fund: The I fund is clearly in a short term down trend as noted by the newly established descending channel. Price broke resistance at 63.90. My next target down is in the 62.25 range. This fund also generated a neutral signal today with the PMO, MAC D, and Wms%R all in negative configurations. The good news is that price is nowhere near a negative crossover of the 20 EMA through the 50 EMA.
3
F Fund: This chart continues to weaken with price now dropping below its 100 EMA. The 20 EMA is approaching a negative crossover of its 50 EMA which would generate and overall sell signal barring improvement in any of the other indicators.  This chart is two or three days from generating that signal.
4
The market has definitely weakened, which if nothing else is different than last year. However, the chance for a nice bounce is high given seasonality and fundamentals. The more volatile a market becomes, the more you will arrive at crossroads as we are now. If you lament over the decision of when to sell and allow your emotions to get involved, you’ll probably sell every time, but that’s not what we do. Our system is to ride the trend to the end and we will only know when the end is by watching our charts. It’s true we can change our indicators to allow more or less time, but that’s a discussion for another day. No matter what indicators you are using, you must have the discipline to stick by them. In the event that it is necessary to sell, the task at that time is to start looking for the next buying opportunity. When you play this game, you will always be playing chicken with a charging bear. The trick is not to blink and to step aside when and if the bear reaches you. That’s all until Monday. May God continue to bless your trades! Have a nice weekend.
God bless,
Scott


Written By

Scott Grimes

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