Good Evening,
The thing you must understand about investing is that it is a game of runs and that you will never be in the right place all the time. What the best investors try to do is to invest where they will be in the right time most of the time. While day traders attempt to time the market and be in the right place all the time, even the best of them fail to reach that goal. For those of us that are normal traders it is really quite simple. We stay invested in one of three ways: offensively, defensively, or in cash. Seldom do offensive and defensive investments work at the same time. There are some rare occasions when they do, but as a rule they do not work together which brings me to my point. Stocks are on another winning streak and defensive investments are sliding, which is what they do when stocks are running. Does that mean that if you are in a defensive position that you should automatically chase stocks on the way up? If you got into this run early, as we did in TSP, that is all well and good, but if you are sitting on a nice profit as we are in AMP, it is best not to chase stocks in a market that is extended and near time highs. Yes, there are times when you do chase (such as after a long sell off) but not when the market is this extended. Chances are that the runs will be short to at best intermediate in their duration. The best strategy if you were not invested at the beginning of the run is to not chase stocks. The market will come back to you before you can react to the changes and more often than not you will lose ground. It is almost a guarantee that your timing will be off if you get in on a run after it has started in an extended market. Once again, the rules are different if it’s not extended. Am I saying to buy and hold? Those of you that know me already know what I’m going to say. That is the worst strategy you can use. We have a saying here “Friends don’t let friends buy and hold.” The prudent investor moves carefully and methodically from offensive to defensive investments, but he never ever chases extended stocks. What is extended? The average P/E (price to earnings) for the S&P 500 now sits at close to 20. That is overvalued. When I invest in individual stocks I normally like a P/E of less than ten. Think of it as an auction when the item that is for sale has been bid up over its actual value. Is it better to buy it at its inflated price or perhaps buy it at half that price on another day? That’s what we are dealing with here. The only difference is that we use our charts to tell when an item (stock) has been overbid. We also take a look at the P/E to determine the actual value of the stock or for an index the average P/E of the stocks in that index. That is a long explanation of why we don’t chase high valued stocks unless we have a good reason. We had an excellent day again in TSP with a gain of around +0.452% while AMP slid back another -0.04%. AMP, which is invested defensively, will make its next run when stocks take their next dive. As a comparison, both allocations are now up close to 1.5% on the month. Now on to the News…
| 08/18/14 | |||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 14.4986 | 16.5211 | 25.8115 | 35.2986 | 26.115 |
| $ Change | 0.0028 | -0.0330 | 0.2199 | 0.4323 | 0.1806 |
| % Change day | +0.02% | -0.20% | +0.86% | +1.24% | +0.70% |
| % Change week | +0.02% | -0.20% | +0.86% | +1.24% | +0.70% |
| % Change month | +0.12% | +0.75% | +2.27% | +3.23% | -0.83% |
| % Change year | +1.48% | +4.95% | +8.11% | +4.84% | +2.15% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 17.2641 | 22.6695 | 24.5446 | 26.0852 | 14.8146 |
| $ Change | 0.0306 | 0.1011 | 0.1410 | 0.1744 | 0.1121 |
| % Change day | +0.18% | +0.45% | +0.58% | +0.67% | +0.76% |
| % Change week | +0.18% | +0.45% | +0.58% | +0.67% | +0.76% |
| % Change month | +0.46% | +0.86% | +1.09% | +1.27% | +1.37% |
| % Change year | +2.66% | +4.01% | +4.63% | +5.04% | +5.34% |
“STOCKS: Based upon a 2/11/2014 Trend Model BUY signal, our current intermediate-term market posture for the S&P 500 (SPY) is bullish. The Trend Model, which informs our long-term outlook, is on a BUY signal as of 2/11/2014 so our long-term posture is bullish.Price has now risen and reached resistance at the short-term rising trend line drawn along recent rising bottoms. This might be an opportune spot for a pullback. The PMO crossed over its 10-EMA generating a PMO BUY signal on SPY. Volume has been steadily dropping as prices are rising which could be of concern given that not as many are participating in this rising trend.”
“Conclusion: Ultra-short indicators had climactic readings again today and now short-term indicators are getting very overbought which could signal a short pullback or consolidation. But in the big picture intermediate-term indicators are very bullish which confirms that while a short-term pullback or consolidation is in order, intermediate term is bullish and could support higher prices after a pullback or consolidation.”
