401K Monthly Analysis 12/17/15

The market is again at a crucial juncture. It wants to climb higher but the pressure of daily and weekly resistance is against its doing so. My daily and weekly time frame charts on SPY both show downward signals. See the charts below…That is really quite unusual. I am sitting on the side lines right now. I had dipped my toes in for a put option position on SPY but quickly exited with a small profit after the market went down and rushed up on Friday.

In my previous employer’s 401K, the recommendations are to be in Cohen & Steers Realty fund, Fidelity Contra fund and American Century Income Instl. Vanguard Instl Index is also a valid choice after these three.

In my current employer’s 401K the fund choices are Spartan 500 and Fidelity Growth. That means the third choice would be cash or money market.

France attacked by ISIS 11/15/15

France experienced an attack by ISIS. I am sorry to hear about those that were killed and their families for the loss of loved ones and the many injured people. Their lives changed. Terrorism adds another layer of uncertainty to the markets. After approaching the highs, the market is withdrawing and I am seeing sell signals. I am out of the market with the exception of a position in a bond fund using the Ivy Portfolio strategy. Also I am still in the vertical calls I had sold on the Nasdaq100 QQQ. That expires in December so I will hold it for a little longer to get more time decay before exiting. Both these positions do better when the market goes down.

SPY has an exit long signal so those that want to preserve capital will want to exit now. Stochastic is bottoming out so it is likely to see a bounce after the recent drops. Although with a terrorist attack, people may not be in a mood to go long. I suppose the computer programs running on algorithms really don’t care.

See chart below on S&P500 (SPY) now has an exit long signal. I usually use it to exit my 401K positions; but since I did not go long in the first place, no changes are needed for me. 

401K Monthly Analysis – Clawing back 11/6/15

The market has clawed its way back to almost its highs. See the chart below on the Spartan 500 fund. It is the only entry open in my current employer’s choices as most of the others are still flashing caution. Emerging markets are very weak. In this environment we would expect bond funds to strengthen but bond funds are retreating at the threat of increasing interest rates. The market is in a quandary as to how to react to the real possibility of a fed interest rate hike in time for Christmas. Unemployment numbers are at its lowest it has been in many years. The US dollar is strengthening at the possibility of higher interest rates, causing oil to remain low. That and the glut in oil supply and that China may be hitting a plateau. We could get a nice Santa rally. I am still cautious and although I should be in the markets, am taking some time out.

In my previous employer’s 401K funds the top choices are Fidelity Contra fund, Fidelity Mt Vernon Growth and Artisan Mid Cap Fund.

In my current employer’s 401K the fund choice is Spartan 500 Fund. Chart below. I would say stay part cash with the rest as there is still plenty of signs that the trend may be tiring. 

See the chart below on the Spartan 500 fund. It is a snapshot over 7 years and shows how the trend has held long for quite some time without a serious draw down, or recession. And with unemployment way down, and Christmas coming up, I don't see a recession in the immediate horizon. However interest rates will likely go up.

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.

What’s Next? 92015

The markets have dropped fast and furious on high volume. Then it bounced back up before taking another kick to the guts on Friday…  so far I am doing good aren’t I? I am stating what the media journalists do. State what has happened in the past as that is fully known. Sometimes it is stated in very worldly, knowledgeable language giving the reader the idea that the writer must know what is going to happen next. Fact is no one knows. Let me repeat that. I don’t know. So what am I doing writing an investment blog that I don’t make a dime out of and I don’t know what is going to happen next?

Blogging gives me a chance to think. I admit some of that is on the spot as to what is going through my mind right now. It isn’t like I write a blog piece and then let it gestate for a few days, tune it and then publish it. It is more like what Trump is doing. Firing off what is in his head without the writers preparing set speeches. I am not against set speeches as it is also important for Presidential candidates to outline their position instead of just intoning “I am the best. See how rich I am? Trust me. I will fix this. Trust me. I will do a better job than anyone else”. That would be like my saying “The market is going up. I know it is. Trust me. I know the market is going up”  Actually the market goes up more often than down and if I took that position all the time, I would be right statistically more often than wrong! And that is what financial advisers do.

But this is not about Trump, Fiorina, Clinton or Sanders. I remain out of the markets as the technical analysis shows weakness in the charts. That works for me. We have seen many of the indexes go through the dreaded death cross… even my work associate from Minnesota, who has never claimed to be an investment expert, asked me “should I get out of the market because of the death cross?” . In today’s world you don’t need me to explain what a death cross is. Google it and find out.  But there is weakness in the markets right now and negative inflation because of the low price of oil. Oil affects everything (except college tuition and health care costs). Transportation and material costs which make up a large portion of cost of goods sold is significantly down. That appears to be because of excessive supply, so I will stay on the side lines and watch the market from a distance.

Meanwhile I am now moving into the next phase of investing by forward testing of my automated trading systems. More about that next time.

The Market made its decision …. And here we go.. 8/23/15

The market made its decision as to how to resolve its sideways action and down we go. This is why I like technicals as I did see this coming and am sitting on the sidelines. See my last post. The SPY ETF is now showing a down signal. The trading system I have on it is definitely weighted to the upside, so when I get an exit long signal, I get cautious and leave my long positions. When I get a down signal on SPY as we see now, that is certainly more serious. Friday’s drop was massive. Most investors are going to be surprised when they get their portfolio positions as the market is definitely down about 7% for the year and will impact 401K accounts. Gold (GLD) and Treasury bonds (TLT) have perked up.

When I look at the chart on SPY, I see high volume spikes already occurring. That may actually suggest that we could be approaching a reversal point. See the last time we had a volume spike on SPY after the drop back in 10/15/14, the market reversed back up. This time I expect we will see more pain but fast drops do lead to quick upside reversals as well.  I will go ahead and start watching for a place to buy some long call positions on QQQ and/or SPY to make some money on the reversal. I will be wanting to buy when the high for the previous price bar is exceeded so as to avoid buying too early. 

Oil has got slaughtered more since my last post. Technology sector for the S&P is down over 6% and has a greater weighting on the S&P than oil. I looked at blue ribbon stocks like Exxon last month and saw comments from folks who said that as Exxon (XOM) dropped that was a great buying opportunity. Not for me. As far as I am concerned when the stock has a down signal, I don’t care if it’s a blue ribbon stock, I am out of it. Down means down and there is no way of determining how far these down drops will go. XOM is down more than 28% to $72 from its high of over $103. Needless to say that is huge. I will consider up when I get an up signal.

Part of me still says this drop is just not enough….that we should be prepared for more. Still I think we will expect a bounce before that happens.. and I will need to use suitable technical to call that out and not trade based on just emotion.