Clawing its way back 102415

The market is clawing its way back towards where it was.  My chart on SPY shows an up signal on 10/6/15. It was a signal that I found hard to believe made sense but that is the advantage of a cold and mathematical calculation based on logic. It pinpoints ups and downs and minimizes risk and sometimes reward. Yes. Technical analysis is far from perfect. It can also result in losses. But it is the only logical way that I can control my emotions and attempt to follow a red-green light approach to investing.

From a fundamental standpoint the economy is growing and appears to be picking up some steam as measured by GDP quarter to quarter. Unemployment is down to its lowest levels in the last 8 years. Interest rates are still low due to fear of a global recession, although Janet Yellen is very likely to at least put one small step forward in increasing interest rates in the next 6 months. Oil is down. Inflation is low, too low actually at 0% after considering oil. Desired target for inflation is 1-2%. So whats there to worry about?

A lot actually… the US election process will gather steam injecting its level of uncertainty. And then there is the unknown and the black swan. Still, this is an environment for moderate investing while keeping an eye towards the door. The market has been going up for 7 years now.

401K Monthly Analysis - Caution 10/11/15

The market has bounced from its lows and it is normal to feel that I should get back into the market. Having avoided the drop, I have to now look at re-entry. The overall chart on SPY shows an up signal but will soon run into resistance at 204. The market is still seeking direction. Short term stochastic is high and I expect some pull back. See chart below on SPY.

It is also interesting that in my 401K analysis the funds that are coming up for investment includes Contra funds and bond funds. This is the first time I am seeing bond funds show up. Not a good sign… as this is a momentum based system and normally it stays in stock funds. Also most of the funds are showing negative values when analyzed across a longer 3 and 6 month performance time frame. I do not like to put much money into the market when I see negative results over a longer time frame as this. Therefore I will sit out.

In my previous employer’s 401K funds the top choices are Fidelity Contrafund, Fidelity Freedom 2000 and Fidelity Govt Income.

In my current employer’s 401K the fund choices are now also more conservative. The top funds are Fidelity Freedom 2000, Fidelity Govt income, Spartan 500 Fund. The last one is similar to SPY. The choices of funds that the system is introducing are more bond funds, at least at a 50% level.

I am sitting in money market in my 401Ks and will consider getting back into other funds in a small amount only after a pullback on SPY. That will be tricky as the pullback could change into something worse; but as long as I have an up signal on SPY I will be looking for an entry.