Good Evening,
And Good riddance to September! The quarter is over and the big indices had gains right? Not so fast. September was the miserable month that we said it would be. When you look past the surface, it wasn’t near as rosy as they painted it out to be. Small Caps were off worse than they’ve been since 2011. The Russell 2000 was off over 9% and is behind the S&P 500 by over 13%. If you weren’t in the right stocks and by right I mean Large Caps, then you had a rough 3rd quarter. While we didn’t suffer that bad, we are lagging by some 5%. The good news is that it looks like we are setting up for a nice run into 2015. We kick off a new quarter tomorrow as this current dip plays out. Although we are still in the middle of poor seasonality, as we noted the past few nights, October is the month when things traditionally turn around. It would be better if the large indices had corrected as deep as most small caps have, but the market has needed this kind of action to shake things up. After three failed bounces, it seems an awful lot like things are returning to normal and if they are, we already now we can make money in that environment given enough time to do so. For once, we aren’t seeing a V-shaped recovery and a lot of traders that thought they were geniuses the past 5 years are starting to find out that there’s a whole lot more to being a successful trader than buying a major index and holding it until kingdom come. Yes, I made money during this run. I adapted to the FED induced buy and hold mentality, but I never liked it. Those of you who were with me during the whole QE program know that I complained bitterly about it even while I was making money. We made 37.3% in 2013 and I hated the market. It forced us to do things that wouldn’t work at any other time. Along came 2014 and we predicted that things would return to normal as the FED reduced its stimulus. You know the rest of the story, I tried to anticipate the change rather than listen to my charts and went back to my normal (pre 2009) indicators which caused me to get whipsawed a total of 3 times. As a result, we under-performed and are in the hole a little over 5%. I’ll take that one. It’s my fault. I’ll also take credit for the 37.3% in 2013 as well. It has been a difficult market, but things are finally starting to act like they are supposed to and will do so even more as the interest rates return to normal. Not that I want higher rates, as the low ones have sure been nice, but they are eventually going to have to go up so we might as well take a positive out of that in that they market will behave as it should. So what does that mean for most people? It presents challenges for them as they have become accustomed to being bailed out with quick bounces. They must learn to play defense again. Buy and hold? Go ahead, you’ll be left in the dust. I’ll see you in a couple years when you’ve made up your losses and oh, by the way, I’ll make this 5% up plus a profit while you’re doing it. The FED safety net is coming to an end and I for one like it! I’m not saying it will be a total bed of roses, but what I am saying is that with God’s help we can deal with it!
Stocks Fall on Confidence Data as Small-Caps Slide
| 09/29/14 | |||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 14.5357 | 16.4889 | 25.9535 | 34.4327 | 25.3208 |
| $ Change | 0.0026 | 0.0209 | -0.0642 | -0.0561 | -0.1081 |
| % Change day | +0.02% | +0.13% | -0.25% | -0.16% | -0.43% |
| % Change week | +0.02% | +0.13% | -0.25% | -0.16% | -0.43% |
| % Change month | +0.17% | -0.56% | -1.13% | -4.08% | -3.71% |
| % Change year | +1.74% | +4.75% | +8.70% | +2.26% | -0.95% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 17.2672 | 22.5738 | 24.388 | 25.876 | 14.6709 |
| $ Change | -0.0061 | -0.0302 | -0.0427 | -0.0525 | -0.0347 |
| % Change day | -0.04% | -0.13% | -0.17% | -0.20% | -0.24% |
| % Change week | -0.04% | -0.13% | -0.17% | -0.20% | -0.24% |
| % Change month | -0.35% | -1.19% | -1.59% | -1.89% | -2.17% |
| % Change year | +2.68% | +3.57% | +3.96% | +4.20% | +4.32% |
“Price technically put in a bottom yesterday, but today ended with a loss indicating there was no follow-through. Price has not yet hit support, but with the breaking news on ebola, the market now has a fundamental reason for pulling back or correcting. It has had technical reasons to correct for some time, but bulls have consistently saved it from a deep correction. Momentum is very negative based on the PMO. Volume was very high on a negative day which is bearish.”
“Conclusion: I generally do not give much weight to news items in my analysis, but in the case of the ebola story, there could be a very negative reaction. The market has been attempting to pull back and correct, but it turns around and recovers quickly. It now has an excuse to get a correction started and technicals support it in the intermediate term. Short-term indicators are still looking bullish, but this may override that. “
I’m starting to be cautiously optimistic tonight. As I look at the charts, I see that it is possible for some more downside, but I also see things starting to set up for a great rally. More than likely this is making a good buying opportunity. Keep your powder dry and stay ready! That’s all for tonight. Seek God and He will guide us. Keep praying! May He continue to bless our trades!
