Good Evening,
The major indices all pulled back in the 1% range today. This action was unlike that of the past 2 years in which the lows for day 1 were the lows for the year. However, this action is more normal for the 1st trading day of the New Year. Throw in the fact that the holiday fell in the middle of the week, which resulted in many traders and analysts being off until Monday and it makes for trading that probably has no bearing on the future market. So why does the market usually go down on the first couple trading days of the year? It goes down largely as a function of traders taking profits in order to defer those taxes to 2014. Also, if 2014 then turns out to be a losing year, the losses for the rest of the year negate the capital gains taxes for the profits that were taken at the beginning of the year. Of course most of you are trading in IRA’s which have no capital gains taxes. That is the reason that you want to keep them that way as long as possible; not to mention the 10% withdrawal penalty that is added if you remove the funds from your IRA before you turn 59 1/2. Anyway, on to today’s trading or should I say profit taking, stocks got off to a weak start for the year, as investors took a step back amid worries about slowing economic growth in China. The Dow fell more than 130 points, or nearly 1%. The S&P 500 and Nasdaq also declined about 1%. This is the first time markets started the year on a down note since 2008. Investors were in a cautious mood after data showed that China’s factories lost some momentum in December, adding to fears that the world’s second-largest economy may soften in the new year. Economic data in the United States wasn’t all that positive either. Manufacturing activity grew in December, but at a slightly slower pace than the previous month, according to the Institute for Supply Management’s index. Initial jobless claims fell for a second straight week but came in slightly higher than expectations. Trading volume will likely remain light this week as many traders are still away for the holidays. While most stocks were lower Thursday, gold started off on a strong note, rising almost 2%. The precious metal fell 28% in 2013, marking the first down year for gold prices since 2000. As gold prices advanced, shares of Newmont Mining (NEM, Fortune 500) and other gold miners surged, as well as the SPDR Gold ETF (GLD) and the Market Vectors Gold Miners ETF (GDX). StockTwits traders predicted that after a dismal 2013, this could be gold’s year to shine. “2014 surprise will be $GDX and $GLD,” said Lach14. “Starting today.”
The days trading left us with the following signals: C- Buy, S-Buy, I-Buy, and F-Sell. Our allocation is 42/C, 58/S. It closed out the year earning +21.31% in the period since 03/11/13 and more than +36% for the year.
For those of you who have been anxious about the recent gains in the I Fund, it lost an ugly -1.77% today and that’s close to double what the C and S funds lost. There is a reason that we aren’t in the I Fund just yet! So with our posted results lagging a day behind you will see today’s results posted tomorrow. As far as where we go from here, I am really not concerned about today’s pullback. At this point I just consider it a healthy bout of profit taking. Actually, if the truth be known we could use a few more days of it to set us up for a new run. Our equity based charts look great so far with each of them (yes even the I) showing solid buy signals. We will continue to watch the charts and play the action that is in font of us. Eventually we will have to get defensive, but we will know when that time comes based on our charts, not on our emotions. That’s all for tonight! May God continue to bless your trades.
Scott
