Divot's Account Talk

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Divot

Divot

Member
First post on TSP Talk - comments as of Wed's close:
Risk levels for the overall market remain high (far right):
  • Market internals were OK today:
NYSE NASDAQ
Advances 2,024 (60%) 1,787 (56%)
Declines 1,205 (36%) 1,235 (39%)
Unchanged 158 (5%) 153 (5%)
Up Vol* 2,076 (71%) 1,467 (67%)
Down Vol* 808 (28%) 682 (31%)
Unch. Vol* 36 (1%) 25 (1%)
New Hi's 170 116
New Lo's 35 117

  • But not as strong as one would expect on a day when all the major indices gained nearly 1%.
The C Fund is still the lowest risk fund, but is clearly in a transition to defense:

  • Note that the C Fund is right up against the highs of last week, resulting in short-term outperformance of the others. I'm not thinking this is the time to chase that performance.






All the stock funds still look like they'll test some of the support levels I highlighted yesterday.

Currently 30 G/30 F/40 S.

Thanks for reading!

- Divot
http://tsptrader.blogspot.com

Charts Courtesy of stockcharts.com
​
 
Paladin -

Excellent catch of a critical typo. I intended to discuss both of the US stock funds separately in yesterday's post. The S fund is currently the lowest risk fund, not the C. Note the adjacent Bullish Percent chart is of the NASDAQ BP - a good approximation of the small cap Wilshire 4500 that the S fund seeks to follow.

Bullish percentages are not so much a contrarian indicator as a measure of supply & demand. Let me put it this way:

The only way the price of a stock (or index) will increase is for more people to want to buy than want to sell.

Bullish percent charts show the percentage of a group of stocks on a Point & Figure "buy" signal. These buy signals are dirt simple: a higher price than the top of the previous uptrend signals a buy (demand driving the price higher) - lack thereof is a sell signal.

A bullish percent chart graphs this battle between supply and demand. The trend on a bullish percent chart has a very high correlation with the movement of the underlying stocks.

Bullish percents can be effective to chose the timing and targeting of market participation, and are indispensable for risk management.


 
New Blog Post

Two roads diverged in a yellow wood...

Bottom line up front - there's no reason to change a fund allocation on the basis of Friday's markets.

Most notable: The longer term Bullish Percents fell - especially the NDX (down 3% Friday!):

Short term indicators for the broad market are not significantly moved to indicate a momentum shift either direction.

Little economic news early next week, but the market environment "feels" like there's plenty of reasons for the market to continue up. It's a pretty strong vote of confidence in our markets when the Chinese government puts $3B into owning the formerly private equity firm Blackstone. Good thing we don't have to make a decision on that "feeling".

Still 30% G, 30% F, and 40% S. I'm going to continue to only partially participate (in the lowest risk area of the market) until the market clearly choses a road to travel. Risk management, folks - risk management.

 
Winning is fun - Losing sucks

Bottom line up front: Nothing substantially changed in the market risk levels today. I'm moving from 60% bond/40% stock to 60% Small Cap / 20% Fixed Income / 20% Gov't Bonds.

For a little deeper read, consider this. Does anyone know what the current level of the Dow Jones Industrial Average bullish percent (BPDJIA) is?

How about a stratospheric 96.66%? (Click the chart to expand)
This means 29 out of 30 Dow stocks are current on a buy signal... Friends, this is pretty rare. Take a closer look at the chart - this is the highest reading in over five years. The last time the BPDJIA even approached this territory was January 2004. This begs the question... how did the Dow do in 2004? I'm glad you asked:

I've marked a couple key areas with arrows - actually I used the exact same arrow (size, shape, and orientation) copied over. Note the steep push to the intermediate term top in Jan 2004. Gee, does that look familiar to the far right end of the chart?

Here's my point: The market (in general) is still on offense, but risk is high - most of all in the C and I funds. To me, this means stay invested, but be prepared for a correction. There's a lot of ways to play this:

  • You could move to 100% in stocks - this is the high stress technique, and rather vulnerable to a sudden and swift correction.
  • You could move to 100% in bonds - low stress, but the market COULD continue up for quite a ways.
  • You can allocate your retirement account to adjust your risk exposure to the stock market as a whole, and then concentrate the stock funds in the lowest risk sector with the most room to run.
If you have a TSP account, you need to think about how and WHEN you manage your risk.

 
New Blog Post

Emerging Clarity

A brief post this evening, highlighting where NOT to be.

  1. Most importantly - the market as a whole is on offense right now. Risk may be high... call it third and long. But that's no reason to punt. All cash/bonds is the wrong place to be - even if I was going to retire next year I wouldn't be all cash right now.
  2. The dollar - not always almighty, but currently showing some strength at an area of significant support. (See chart on my blog). When the dollar is strong, the international market's gains are blunted. The major world markets are currently at higher risk levels than US markets, so the risk/reward ratio doesn't point to the I fund (stock symbol EFA) as the place to concentrate now. A little - yeah, that's OK.
  3. Now the toss up between the C (S&P 500) and Small Cap fund. I don't think either is a wrong choice. One thing to note:
    • Risk levels are much lower in small cap stocks right now. Try 50ish % versus almost 80% in the S&P. This means that demand has already pushed nearly all the S&P stocks onto buy signals. I can't say whether you're late to the party, but you're not buying ahead of the gains. Put another way, the ONLY way ... let me emphasize that ... the ONLY way for you to make money on an investment is if more people want to buy it after you own it than before you made the purchase.
By the way, some of the short term indicators that were leaning "south" are starting to reverse. If this continues, I'll shift some more from the G/F funds into stocks.

 
I agree!
I was IFR in TRS on a GCA into Ft. Hood when we had a fire in the instrument panel! But, there are some things you just can't predict!
 
Nicely said. Punting isn't even an option where we're positioned. Yesterday's sell off was something the market needed, a breather. It looked like another one of those technical sell offs as the market dumped as soon as it hit above the 1525 level. Of course Greenspan's comment triggered the fear factor initially. Here's my thing with Greenspan... Is that a newsflash you're telling us that China is due for a correction? I mean, any person with market sense would understand that no market in the world is going to climb like China forever. I'm sure alot of fools shorted yesterday, but that will just make the market go higher since they will surely panic again and get run over by the bull next week.


Today will be a low volume day so who knows what could happen. Glad I didn't bail out to G yesterday, it wasn't worth taking the loss Barclays dished out.
 
Divot said:
Hey, nothing wrong with playing "Marty Ball" if you've got a system that works for you.
Click to expand...

That's my problem right now....grabbing at straws. Don't have a system. You, 12%, Showme, Birch, Fabijo, Thunder5, Nuut, Ebb, Paladin, and a few others (please forgive me for not mentioning you) definitely know waaaay more than me, so I watch, learn, and try not to get burned.
It's funny, I fly single engine helicopters, at night, in the mountains looking for the bad guys and it doesn't phase me, but when it comes to pulling the trigger on an IFT... I feel like that first day at AOCS...scared sh#tless.:blink:
I appreciate your and the aforementioned's input. Keep it up (All of you).
Fair winds and following seas...Semper Fidelis.
Remo
 
Watching what others are doing who are successful is a "system" in a way. I started watching this site about a year ago when Fundsurfer and Griffin were pulling returns like nobodys business, so I started to read what they had to say...sometimes follow there moves, sometimes not. I then started pulling the weekly tracker sheets to see who the "hot hands" are and I try to balance that with those that were smoking hot last year...all the while reading my Wall Street Journal and trying to figure out what everyone was talking about. I have NO background in finance, so I share your uncertainty about handling it...but it is kind of like basketball, find out who the hot hand is...and keep dishing them the ball.

Not that you were asking for advice, just thought I would throw my two cents in...

Have a great weekend, and keep finding those bad guys, we appreciate your service.

BigJohn
 
BigJohn said:
Watching what others are doing who are successful is a "system" in a way. I started watching this site about a year ago when Fundsurfer and Griffin were pulling returns like nobodys business, so I started to read what they had to say...sometimes follow there moves, sometimes not. I then started pulling the weekly tracker sheets to see who the "hot hands" are and I try to balance that with those that were smoking hot last year...all the while reading my Wall Street Journal and trying to figure out what everyone was talking about. I have NO background in finance, so I share your uncertainty about handling it...but it is kind of like basketball, find out who the hot hand is...and keep dishing them the ball.

Not that you were asking for advice, just thought I would throw my two cents in...

Have a great weekend, and keep finding those bad guys, we appreciate your service.

BigJohn
Click to expand...

GMTA- Great Minds Think Alike. Thank you.
 
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