401K Monthly Analysis – 10/6/12

The S&P500 (SPY) chart points down based on my trading system, which gives me some reason to be cautious. The indivdual mutual funds in the 401K are all still showing up signals, although a pull back might be in order. Being conservative, I also hedge my long positions using SPY put options in a separate account. I am extremely averse to large losses and will do everything I can to prevent that, including giving up as much as third to half of my upside through buying “fund insurance”. However this insurance has cost me over the last several months and I realize it is a price I pay to avoid volatility in my account.

Going into my current company’s 401K the top funds selected by my monthly analysis are Fidelity Equity Income, Fidelity Disciplined Eq, Spartan 500, and Royce Opportunity. Fidelity Government Income Fund and Fidelity Blue Chip Growth fund needs replacing. Fidelity Govt Income Fund took a big hit Friday. Gold also went down. The stronger unemployment numbers have some people convinced that the economy is turning the corner and further Bernanke handouts may not happen. Royce Opportunity requires a long stay in the fund and I have a small position in it that I intend to hold for a few months due to the redemption fee for getting out early. See charts below on these funds.

As far as the 401K monthly analysis on my previous employer’s funds, top of the pick is American Century Equity Income Instl, Vanguard Inst Index, PIMCO Global Bond fund and TRowe Price Intl Discovery and Fidelity Mt Vernon Growth. The Cohen Steers Realty fund needs exiting. I see down signals also on VNQ and SPG which are all realty funds. The realty sector has recently turned downwards.

Notes:  The methodology I am using has been written up in the past and is based on a momentum strategy where I put my money into the funds with the best performance based on a slower monthly rate of change analysis using 3 and 6 months performance data. I conduct the analysis 1 month, always during the weekend between the 2^nd and 9^th day of the month. All my change orders are submitted Sunday night and are effected after 4 pm Monday.