401K Monthly Analysis - Santa Rally? 12/6/13

Dare we hope for a last Santa rally?

The market remains buoyed with good news of an increasing employment picture and low interest rates. See chart below on SPY (S&P 500 Exchange Traded Fund). My trading system on SPY remains pointed up. I should add that it has been up since 7/11/13 when the blue balloon showed up on the chart. The blue balloon was an exit signal on the down signal. As I have pointed out in previous posts, ext down means enter long on this system. My strategy is to stay long on my 401K funds as long as the system is pointed up. Any long positions should be treated carefully with stops and rules for disengaging from the market during the period the system signals exit long or down.

My current employer’s 401K funds analysis shows that WFA SPL Midcap VL as the top choice followed by NB MDCP GRTH Trust, and then Fidelity Large Cap. The only change would be from Fidelity Div Intl to Fidelity Large Cap. The Midcap funds have held the top two positions for several months now and I can’t help but feel that they may top out soon. The chart below on WFA SPL Midcap VL shows the cycle indicator at its peak suggesting a pullback as likely. Still, there could be a Santa rally this year and I plan to hold on and follow the system.

In my previous employer’s 401K the top choices are Vanguard Admiral, Fidelity Contra fund, Spartan Ext Market, and Domini Social Eq funds.

I have also chosen to buy some TBF in my R/IRA account. TBF is the ProShares Short Bond fund. It behaves opposite to bond funds which are struggling to keep their head up in an economy that has been positive, raising questions about the Feds needing to raise interest rates. As for investing in gold and silver. I prefer to watch the commodities index and trade those when I get an up signal. Gold and silver has been weak and I am not a contrarian investor who buys weakness, unless my trading system suggests enter based on some upward movement.

I have been working on creating trading systems on about 8-10 stocks that I will trade for the next year. I am using back testing using about 33 different trading systems to pick and sort. In most cases I am using a primary trend following system coupled with a faster secondary system that is often contrarian in nature. I will post a couple of that next time.