401K - Pointing North but Changing 5/5/12

It is time to do my monthly analysis on my two 401Ks in Fidelity. My 401K system is a slow moving system that looks at long trends and does not react jerkily or fast. It is not affected by recency as our minds are. Therefore the selections it makes works well over a long term basis and can leave me at odds with what my brain wants to do when it sees a large market drop. My SPY chart has been cautioning me with an Exit long that I reported a few weeks back. My 401K system does not understand that. And I am faced with what I must do given this conflict and recent market drops

My first Fidelity 401K report is based on my current employer. The direction there is to continue with Royce Opportunity, Fidelity Blue Chip Growth, and put some in Fidelity Government Income fund. The addition of the Fidelity Government Income Fund is the first sign of shifting to a more cautious position and my brain is relieved to see that. I know it is impossible to predict how long a signal lasts. But my daily charts flagged a down signal whereas the monthly momentum method is going to slowly shift and not move quickly. My brain says this is an election year and I do not see everything going to pots; but I have to compartmentalize confusions in my personal thinking and do what my systems tell me to. A good disciplined approach will beat an emotional reactionary approach in the markets.

In my second Fidelity 401K, top of the list is Cohen & Steers Realty Fund. I am not surprised with that as I see IYR and SPY rocking on my daily charts. I am sure some people would be surprised with the first choice. Other selections that I am being “steered” towards are Artisan MidCap FD (Symbol ARTMX and not ARTQX), Fidelity Contrafund. PIMCO Global BD Admin is the only bond fund that is showing up as a possible candidate for those who are cautious (like I am). So there it is…

Keep in mind that I have my long positions hedged with SPY options and also have some down positions using put options on SNDK and GOOG. Also, I own TIP and TLT which tend to do better in down markets. I am still long on PCP and HOG.

People wish to learn to swim and at the same time to keep one foot on the ground.

- Marcel Proust