Mike's Account Talk

[Mike]

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I do hate the G-fund... but with 10 year yields bottoming out, I really don't see how the F fund can do very well going forward (unless the economy just tanks and goes into a recession). It's incredibly difficult to make any money while being defensive.

I'm continuing to wait on the market - the economic data was worsening for awhile but has since reversed somewhat and is more positive now with better manufacturing data. Payroll data comes out Friday, which is of course big. In the meantime, I'm watching to see what happens on the technical side - 1190 support continues to hold, but the C fund was darn near completely flat in June.

You'll note the FOMC said nothing about slowing conditions in the economy like they did in May... perhaps that's foreshadowing a good payroll report. If the S&P continues to bounce around 1190 all week, I may move a limited amount into the market and play the payroll report and "sell the news" Friday.

 

[Mike]

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The terrorist attack has changed things a bit. Looking back at past market performance when under stress from an event such as the one that took place in London, I've noticed that a sell-off has commenced in equities (no big surprise there). A bottom was reached in ~ 5 days. After the 9/11 attacks, the S&P fell over 100 points, but it then recovered within a matter of weeks as it rallied to end the year. Last year, after the bombings in Spain (took place in March), the S&P promptly shed ~4 1/2% in value. This would bring today's S&P down to about 1140, very close to the 2005 low. This happened very quickly, just like it did after 9/11.

Given the fact that bonds tend to move opposite stocks, I'm going to speculate a bit and move 50% into the F fund today to try to catch (what's likely to be) a short-lived rally in the bond market. June's payroll numbers are coming out tomorrow, as well. I don't know how much the market will pay attention to that after the attack on Britain, but another weak jobs report would probably fuel a continued bond rally.

In any case, I think I'll bail out of bonds sometime next week as equities find their support level and bounce off that.

50 G / 50 F effective today... feel free to check out the SPX charts I posted in the "market talk" thread. They show what has happened in the past under similar circumstances.

 

[Mike]

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Looks like cooler heads have prevailed in the US market... which actually gained value yesterday. :shock:

The S&P broke below 1190 support (even though it wound up higher on the day), so that's something to consider going forward. Basically, it widened the trading range. Whether or not the market slides slowly downward over a month or two like last year or plunges and then rallies ala 1994 remains to be seen, though.

Hopefully my F fund play will pan out. G fund is boring me to death.

 

[Mike]

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I am now changing strategy a bit and am looking at ~1190 on the S&P as an entry point. I believe we are now seeing a divergence with the 1994 chart - which featured a swift downward movement followed by a prolonged rally. We've had a few pushes to the downside, but the market has reversed itself and moved right back up later on. The S&P fell into the 1180's on the day of the London bombings, but it has recovered nicely and is approaching the year's high again.

With the hurricane and oil prices so high, I don't see how or why it would break out past that high and expect it to hit the resistance in the 1120's and drop back down again. When/if this drop back down happens, I'm hoping the bond market moves up a bit and I recoup that two cent loss and then some.

 

[tsptalk]

Happy Birthday Mike, wherever you are! I have a feeling you'll be partying it up pretty good tonight celebrating the big 29.

 

[nnuut]

Yeah, Happy Birthday Mike!!! hic!