Good Evening,
The market ended mixed today taking a needed rest after four successive days of gains. As far as I can tell, it’s just some consolidation on the way up. However, given the recent volatility, you can never rule out another reversal. We must remain on our toes.
Stocks hit pause after the Yellen rally
The day’s action left us with the following signals: C-Buy, S-Buy, I-Buy, and F-Buy. As of a result of the new buy signals generated in the C, S, and I Funds, we reallocated our funds as follows: 40/C, 15/S, 45/I. Our allocation is -2.70% for 2014. Here are the latest posted results:
| 02/11/14 | |||||
| Fund | G Fund | F Fund | C Fund | S Fund | I Fund |
| Price | 14.3273 | 15.9919 | 23.5545 | 33.3021 | 25.1394 |
| $ Change | 0.0008 | -0.0243 | 0.2590 | 0.3069 | 0.2842 |
| % Change day | +0.01% | -0.15% | +1.11% | +0.93% | +1.14% |
| % Change week | +0.02% | -0.14% | +1.27% | +1.18% | +0.98% |
| % Change month | +0.07% | +0.01% | +2.18% | +0.83% | +2.47% |
| % Change year | +0.28% | +1.59% | -1.34% | -1.09% | -1.66% |
| L INC | L 2020 | L 2030 | L 2040 | L 2050 | |
| Price | 16.8242 | 21.6916 | 23.295 | 24.6226 | 13.9184 |
| $ Change | 0.0360 | 0.1212 | 0.1647 | 0.1990 | 0.1273 |
| % Change day | +0.21% | +0.56% | +0.71% | +0.81% | +0.92% |
| % Change week | +0.25% | +0.61% | +0.77% | +0.89% | +1.00% |
| % Change month | +0.47% | +1.11% | +1.37% | +1.53% | +1.72% |
| % Change year | +0.05% | -0.48% | -0.70% | -0.85% | -1.03% |
I’ll admit, our allocation usually performs better than this. We fell victim to the V-Shaped bounce that we have talked about in the past few newsletters. That said, I will not change back to the use of the longer indicators that I utilized the past few years to compensate for the FED’s quantitative easing. Given the tapering of that program, I just do not feel it is prudent to continue to ignore downturns. I don’t care how profitable it might be currently. It will become more dangerous as the FED money is removed to plod blindly on. Sooner or later we will have a real correction. I know this is a corny analogy, but I’ll use it anyway. What goes up, must come down. Here is the chart for the S&P 500. I have annotated the buy signals that were generated. It is very similar to the charts for the S and I Funds so there is no need to post those here. Basically, if you’ve seen one you’ve seen them all…..
We react to the signals as soon as they come. It is extremely profitable unless we are whipsawed. Those that take defensive action are punished for doing so when one of these v-shaped bounces occur. I want to make one thing clear to you all. Those that do not take defensive action are the ones who are punished when V-Shaped bounces do not occur. You can note the V-shaped bounce that occurred on or about February 6th on the chart above. I have done this for the better part of 20 years and I honestly can’t count the times I saw a V-Shaped bounce occur on one hand prior to 2009, when the Fed’s quantitative easing program kicked in. That is why I and most other Technical Analysts strongly believe that these chart patterns will not continue as they have during the past three years. Of course, I will make every effort possible not to make a change until I have to, knowing that it is still possible for one of these V-Shaped bounces to occur, but I will not risk a major loss in my portfolio to do so. I remember going to a beach a while back where there were no life guards. There was a sign on this beach that stated “enter the water at your own risk”. I will change it for this instance to, buy and hold at your own risk! Perhaps the psychology of the herd and computer trading has made this a new rule of the game and if it has, I’ll adapt as I did the past three years. If indeed it has changed, I am going to use another expression that they use in Missouri: Show me! When the FED money is gone and these bounces continue to occur, then maybe I’ll fully embrace them, but for now I will take every step possible to protect my hard earned capital. Remember, “It’s not what you make, it’s what you keep!” I realize that I am beating this subject to death. I just want to reinforce that fact that this is not normal. The FED money has poured into the market so long now that most people don’t remember when it was normal. Believe it or not, tapering is here and the FED money is coming to an end. I just guess it’s going to take a little more tapering before we see normal again. That’s all for tonight! Have a nice evening.
God bless,
Scott
