Good Evening, I worked a good while on a wonderful newsletter tonight and it disappeared. That hasn’t happened in a month of Sundays,but I came back to my desk and it was gone. Power spike??? Oh well, I’ll definitely be making it brief tonight. The market continued moving up today. I’m cautiously optimistic that the action I am seeing in small caps is leading us back up. However, while things are starting to look better, they are not better yet. The Russell 2000 just started trading back at its 200 EMA today and it will take more trading in that area or higher to repair the damage that’s been done during this downturn. A bottom may indeed be forming, but what you must understand is that bottoming is a process. It rarely happens in one day in a normal market. Those of you that learned to trade in the period since 2009 need to forget what you have been doing. If you trade that way in a normal market you will be massacred. Again, in a normal market bottoming is a process. It usually takes several days or weeks of give and take before the market heads back up for good. Totally unlike the V shaped bounces (named for the V’s that they form on the charts) that head straight back up. This type of action was fueled by an endless supply of cheap FED money that’s now about to dry up. As this bottoming process takes place it is tempting to jump back into equities because it just really feels good. However, you must be patient as market conditions improve to allow you to re-enter the market with the least amount of risk and the best chance of reward. In order to do that a new trend must be clearly established, which requires you to watch from safety while the market rises. That is always the hardest thing to do. Nevertheless, it is what sets the prudent trader apart from the reckless one, that and the balance of his portfolio….. All that said, Small Caps and Gold are improving and may allow entry into the market in the coming days, but we need to be patient and let it play out. Right now the only thing we have for sure is a nice oversold bounce and we need much more than that to risk our precious capital. If this market continues up there will be plenty opportunities to make gains……plenty of safe gains!
U.S. stocks end higher despite drag from IBM
| 10/17/14 | |||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 14.5525 | 16.7196 | 24.7823 | 32.9743 | 23.8077 |
| $ Change | 0.0010 | -0.0168 | 0.3157 | 0.1536 | 0.3118 |
| % Change day | +0.01% | -0.10% | +1.29% | +0.47% | +1.33% |
| % Change week | +0.05% | +0.41% | -1.00% | +1.72% | -0.10% |
| % Change month | +0.11% | +1.42% | -4.25% | -3.21% | -5.87% |
| % Change year | +1.86% | +6.21% | +3.80% | -2.07% | -6.87% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 17.1285 | 22.0324 | 23.6294 | 24.9468 | 14.066 |
| $ Change | 0.0399 | 0.1300 | 0.1759 | 0.2095 | 0.1340 |
| % Change day | +0.23% | +0.59% | +0.75% | +0.85% | +0.96% |
| % Change week | -0.01% | -0.10% | -0.11% | -0.09% | -0.11% |
| % Change month | -0.74% | -2.22% | -2.87% | -3.30% | -3.80% |
| % Change year | +1.85% | +1.09% | +0.73% | +0.45% | +0.02% |
Lets keep an eye on the S Fund. It is officially called a mid cap blend, but it has a bunch of small caps and acts more like a small cap fund than a mid cap fund. As usual our chart is courtesy of the fine people at Stockcharts.com.
The market appears to be following our forecast of turning up at the beginning of November. Our strategy is to continue to closely monitor our charts for confirmation of a new rising trend and, when that occurs, to find the best entry point into the equity market. Right now, it appears that small caps and gold may provide the soonest opportunity to exploit a new uptrend. I repeat, at this time, all we have is a very nice counter trend bounce, but some follow through could easily establish a new intermediate upward trend. That’s all for tonight. Have a nice evening and may God continue to bless your trades.
God bless,
Scott
