Good Evening, Well the pattern of market reversals continued today with the market reversing course in the afternoon session. Only one problem, the reversal didn’t work in our advantage this time. The market gapped up nicely this morning on a simply fabulous jobs report by the private firm ADP. I mean it was off the scale more than economists had estimated coming in at 263,000 jobs added last month verses an estimate of 190,000. Of course the official government report will be Friday. Most of the time these reports agree but sometimes they don’t. So why then did the market reverse and sell off this afternoon? The Fed minutes from last months meeting were released at 2:00 PM EDT. If you will remember in my last blog I wrote about the market trading off of potential interest rate increases and statements made by the Fed. The market reversed because two things were in this afternoons released statement that made investors uneasy. #1 The Fed stated that stock valuations are high and that the market is extended and #2 That that after years of manipulating the market through the purchase of bonds and real estate backed securities, the Fed is now ready to start unwinding their 4.5 billion dollar balance sheet or in other words they want to move more towards normalization. I think the first statement effected things to a lesser extend while the last one carried most of the weight. The market hates uncertainty and unlike the times that the Fed has raised interest rates and communicated it to the investors nothing previously has been said about unwinding the balance sheet until now. This was the first time that this has been mentioned. However, if you think about it, returning to normalcy is a good thing. It means that the economy is stronger and better. I think this sell off was purely emotional and way overdone. I expect in the long run that the statement will have more impact on the bonds than stocks. Anyway, that’s the reason the market sold off. Now on to more important things. Since we invested in the I Fund it has underperformed. Why? The dollar has strengthened in recent weeks which has put some downward pressure on the I Fund. This strength in the dollar was basically due to weakness in the South African Rand and weakness in the British Pound (As a result of Brexit). I consider both of these effects as transitory. The dollar may continue to rise in the short term. However, it will ultimately succumb to rising interest rates which are a given as the FMC has already all but guaranteed two more rate increases in 2017. Some analysts are even predicting three. So foreign stocks should start to outperform domestic ones over the long haul. We will have to be patient to see if this strategy plays out. That means we may underperform in weeks to come, but we should be fine moving into the fall. Of course we will react to the whatever action we see on the charts and if that requires us to make an adjustment to our strategy we will do so….. That’s what we do.
Todays trading left us with the following results: Our TSP allotment dropped -0.53%. For comparison, the Dow lost -0.20%, the Nasdaq -0.58%, and the S&P 500 -0.31%.
Wall Street falls as Fed minutes reverse earlier rally
Todays chart action left us with the following signals: C-Neutral, S-Neutral, I-Neutral, F-Neutral. We are currently invested with 100% in the I Fund. Our allocation is now +2.25% on the year not including the days results. Here are the latest posted results.
| 04/04/17 | Prior Prices | ||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 15.2801 | 17.6574 | 32.7186 | 42.4956 | 26.318 |
| $ Change | 0.0009 | -0.0003 | 0.0235 | -0.0170 | 0.0070 |
| % Change day | +0.01% | +0.00% | +0.07% | -0.04% | +0.03% |
| % Change week | +0.03% | +0.27% | -0.09% | -0.87% | -0.35% |
| % Change month | +0.03% | +0.27% | -0.09% | -0.87% | -0.35% |
| % Change year | +0.61% | +1.20% | +5.98% | +3.66% | +6.98% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 18.7244 | 25.1687 | 27.9 | 29.9684 | 17.1472 |
| $ Change | 0.0025 | 0.0050 | 0.0077 | 0.0091 | 0.0057 |
| % Change day | +0.01% | +0.02% | +0.03% | +0.03% | +0.03% |
| % Change week | -0.02% | -0.09% | -0.16% | -0.20% | -0.24% |
| % Change month | -0.02% | -0.09% | -0.16% | -0.20% | -0.24% |
| % Change year | +1.71% | +2.82% | +3.97% | +4.52% | +5.03% |
Now lets take a look at the charts. All signals are annotated with green circles. If you click on the charts they will become larger.
C Fund:
S Fund: The S Fund moved to an overall Neutral signal as the MACD moved into a negative configuration to join the PMO.
I Fund:
F Fund: The SCTR still has no pulse!
No doubt the market was a wild ride today. We’ll just have to keep an eye on the I Fund chart and stick to our long term strategy as long as it will allow it. Also, I would be amiss not to mention to keep praying that God will continue to bless our group! See you tomorrow.
