Good Evening,
The best place to be was cash, the second best place to be was bonds and the only good thing I can say about them are that their losses were small. That was not the case for stocks, virtually everything in the stock market took a big dive. Even gold got hammered, which is odd for a day that’s a major sell off. Bottom line: nothing worked but cash. We dropped 2% in TSP and lost only .26% in AMP. Our AMP allocation bettered the S&P 500 by 1.74% which was good, but as the old saying goes, a loss is a loss and no loss is a good loss……… Let’s take a look at the news and the charts.
NEW YORK (CNNMoney)
The best thing we can say about Thursday’s stock market trading is that it is now over. The Dow fell 317 points, erasing all of its gains for the year.
The day’s sell off left us with the following signals: C-Neutral, S-Neutral, I-Neutral, F-Neutral. We are still invested at 50/C, 50/S, but we may be forced to move tomorrow. I am hoping for a bounce, but barring a very big one we will get a sell signal in the S Fund. With all the turmoil abroad, it may be a safe bet to watch from the sidelines even if we do get a bounce in the morning. As we have said, this market is primed for a real correction so we must take every sell off seriously. Our allocation is now -4.08% on the year not including the 2% that will be deducted tonight. Here are the latest posted results:
| 07/30/14 | |||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 14.4808 | 16.393 | 25.7513 | 34.915 | 26.5611 |
| $ Change | 0.0009 | -0.0658 | 0.0060 | 0.0930 | -0.1578 |
| % Change day | +0.01% | -0.40% | +0.02% | +0.27% | -0.59% |
| % Change week | +0.03% | -0.33% | -0.39% | -0.17% | -0.54% |
| % Change month | +0.19% | -0.22% | +0.64% | -2.37% | -1.11% |
| % Change year | +1.36% | +4.14% | +7.86% | +3.70% | +3.90% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 17.2434 | 22.6699 | 24.5504 | 26.0916 | 14.8275 |
| $ Change | -0.0066 | -0.0181 | -0.0227 | -0.0246 | -0.0156 |
| % Change day | -0.04% | -0.08% | -0.09% | -0.09% | -0.11% |
| % Change week | -0.08% | -0.21% | -0.27% | -0.30% | -0.34% |
| % Change month | +0.07% | -0.12% | -0.24% | -0.35% | -0.43% |
| % Change year | +2.54% | +4.01% | +4.65% | +5.06% | +5.43% |
When today’s results are posted there won’t be one Fund except the G Fund that will be positive for the month. Let’s take a look at the S Fund as it is on the verge of an almost unavoidable sell signal. (Charts courtesy of stockcharts.com)
The 10 EMA is on the verge of passing through the 50 EMA which will validate a sell signal already given by all the other indicators that I use. The most important are the indicators presented on this chart. I have annotated the near-sell signal by a blue circle. Should we get this signal tomorrow, we will re-balance our allocation. Also worth noting, but not annotated, is the fact the price has now broken below the ascending channel and is possibly establishing at least a short term descending price channel. Should this become established, it’s a pretty safe bet that we have full correction on our hands. Also bearish, the PMO remains in a free fall with plenty of room left to fall before it becomes extended in oversold territory.
I’m looking for a bounce tomorrow, but I won’t be at all surprised to see some more downside. I’m going to take a look at things tomorrow before I make a decision as to whether or not to ride this dip out. As we all know, I’ve already been whipsawed three times this year and I’m not in a hurry to make it a fourth. That said, this market is beginning to have a different feel. The dip buyers aren’t showing near the confidence that they did for the past four years. Could it be that their FED safety net is getting thin? We’ll see, but it sure is starting to feel like old times. If that’s the case, we know what to do!
Now, since this is pretty serious lets look at some more charts. Here’s what Carl Swenlin’s daughter, Erin Heim, had to say about it. She does analysis along side her father since they merged with stockcharts.com.
Price gapped down, putting it completely outside of the bearish rising wedge and short-term rising trend channel. It appears it closed on the support line drawn from the Feb low. The PMO predicted this fall since its negative crossover its EMA a few weeks ago. Volume on the $SPX was actually about average.
Ultra-Short-Term Indicators: Very climactic readings on all ultra-short-term indicators appeared today. When these indicators climax like this, we try to identify them as either an initiation climax or an exhaustion climax. In the case of today, I view this as an initiation climax, meaning that this is just the beginning of a decline, rather than the end of one.
Short-Term Indicators: These indicators have now reached oversold territory and are nearing extreme oversold readings. This is bearish for now.
Intermediate-Term Indicators: At last these indicators are beginning to get past the previous low readings that were being classified as near-term oversold. Intermediate-term indicators have a large distance to cover before reaching actual oversold territory.
Conclusion: The Argentinian bond default seemed to shake up the market and finally jump start a long overdue correction. Price did manage to stay above support of the medium-term rising trend line, because of this, it is not out of the question that we will see a healthy bounce before the decline continues. All indicators are bearish, so lower prices should follow.
I’ve changed my mind. I’m going to take what I can get tomorrow and get out until I get a new round of buy signals. This just feels too much like old times so I’m going to use the old indicators, one more time…surely I can’t get whipsawed four times in one year…There I said it. I am putting in an interfund transfer for 25/G, 75/S. Katie bar the door! May God continue to bless our trades!
Have a nice evening.
Scott
