Short term market outlook

[IBD Fan]

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Hi Tom and all. Im a new member that has been seriously reviewing the chat here for the last few weeks. Great site and appreciate the opportunity to get other opinions and information. I havent seen too many comments on the Investors Business Daily as a tool to follow the market. So in the interest of trying to help other fellow TSPers, especially with all the mixed signals at this time I would like to add another source to the many that are followed here. In my view the use of the IBD - Big Picture column is a simple way to follow the market pulse. Here are some postings in the column for the last week regarding the current outlook (note the date of the issue reflects on the market activity for the previous trading day):

4 Jan 05: Market in a confirmed rally (has been the same comment for many months)

5thru 7 Jan 05: Rally under pressure; consider raising cash

10Jan 05: Rally all but dead; follow sell rules, consider raising cash

This has helped me to confirm my past transfer from 50%S and 50% C to 100% G effective 6 Jan 05. I had been in the same allocation for over a year until I just switched. My retirement horizon is 4 years. I havent figured out yet how to calculate my returns using the tsptalk calculator but like many others made a nice profit in the last year.

I havent yet figured out what is a good indicator in the IBD for the I fund but it seems too complicated for a single simple "pulse".

 

[Comstock]

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IBD fan - thanks for the tip!:^ I'm a new member myself. Where do you find the IBD Big Picture colums? Thanks . . .

 

[IBD Fan]

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Hi Comstock,

Welcome! You may find the Big Picture column on the front page of each hard copy issue of the Investor's Business Daily financial newspaper. Good Luck:^

 

[Comstock]

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Thanks again, IBD fan. I found the on-line site as well, but you need a membership to access the article. Take care . . .:^

 

[tsptalk]

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IBD Fan wrote:

Hi Tom and all.

Welcome IBD!

 

[Rolo]

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Welcome, IBD Fan!

That reminds me...I've completely forgotten that I had a subscription and can access their web site! D'oh!

(I have it on hold until I move.)

 

[IBD Fan]

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I'm back from a trip and just want to update the IBD market pulse.

11 Jan 05: Rally all but dead; follow sell rules; consider raising cash

12 - 18 Jan 05: Rally dead; follow sell rules; consider raisng cash

19 - 24 Jan 05: Market in correction; follow sell rules; consider raising some cash

Also I found an indicator in the IBD for the I fund in the World Stock Markets(a list of charts that includes a chart for the EAFE). But what I havent found is that single simple indicator to give the "pulse" for the I fund whcih I think may be too complicated. Does anyone have such an indicator?

 

[Guest]

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Yeah, I do. Follow the US Dollar Index. Assume that the I fund will approximate the return of the C fund and then factor in the % advance/decline of the dollar. Also the indicator that Tom lists here is very good (EFA).

 

[IBD Fan]

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Thanks Sarah and Tom (I saw the chart on the US Dollar today):^. Would be nice to see the two charts side by side (US Dollar and the EFA) on the same scale and time periods to see how closely they track. Anyone guess how much the contribution of the US Dollar is on the impact of the EAFE or the EFA?

It seems if I were to put money in the I fund, I would want to track the progress along with projections at the site indicated by one of the members (barchart.com) but I am too inexperienced in that area and need to learn what the Trendspotter data represents. I guess there are other similar sites that tracks the EFA and provides projections. My guess is (similar to stocks) a few analysts evaluations are better than one.:shock:

 

[tsptalk]

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IBD Fan wrote:

Anyone guess how much the contribution of the US Dollar is on the impact of the EAFE or the EFA?

[url]http://www.msci.com/equity/index2.html[/url]

This site updates only once a day but it shows how the EAFE index did inforeign currency and US dollars. You can see the effect pretty clearly.

 

[IBD Fan]

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Mr Tom your advice is super as usual.:dude: The site you gave has so much data thatI could go dizzy trying to figure out what to look for - just goes to show how much of a novice I am when it comes to investing in the I Fund. Imust study it more and read the postings on this site to learnsome good practices and how to make wise decisions about when to jump into it and when to get out. Have notinvested in itin the past but am considering it.

Just seems like the variables in the I Fund are so much more complicated then the US stock markets which off course is a puzzle in itself.:shock:

Would you say that investing in the I Fund at this time is more like 25% International equities and 75% US dollar currency fluctuation dependent? or is it more like 100% dependent? I know this is trying to make it sound too simple but thats how I like to think - in simple terms. I also think that the investing climate is fluid (thats why I used the term "at this time") and can change rapidly.

 

[Guest]

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IBD Fan wrote:

Would you say that investing in the I Fund at this time is more like 25% International equities and 75% US dollar currency fluctuation dependent? or is it more like 100% dependent? I know this is trying to make it sound too simple but thats how I like to think - in simple terms. I also think that the investing climate is fluid (thats why I used the term "at this time") and can change rapidly.

The website that Tom referred you to can give you a fairly good idea. It shows you that YTD, EAFE is up0.10% but in US Dollars it is down 3.25%. Now lets look at the USD Index. It wasabout 81.3 on January 1 and is currently about 84 -a rise of 3.32% So essentially the entire decline in the I fund since January 1 is attributable to the rise in the USD.

We can also gather from these stats that, thus far this year, the world markets that compose the EAFE are outperforming the US markets, since they are basically flat for the year. US markets have been downsignificantly (4%).

 

[IBD Fan]

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Golly Sarah, it takes a very knowledgeable person like you to understand and interpret the data and explain it so clearly:^. It would have taken me a long time to figure it out. Am getting more interested as the days go by and may even jump into the I fund as I see the EAFE was up a bit today and the projection in the barchart.com (EFA) says to buy! Will track it a little longer to see how good the projections are.

The beaty of this site is Tom's consistently good advice and the opportunity to crossfeed lwith other knowledgeable people - like you just did - it is appreciated.

 

[IBD Fan]

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I'm still holding in 100% G based on the IBD big picture market pulse which showed the following:

27 thru 31 Jan 05: Market in correction; follow sell rules, consider raising some cash.

I also checked the barchart.com efa (Trendspotter) projections for the I fund: They were consistently recommending buy signals but the actual I fund lost ground on most days in the past weak - so I am suspect about the projections.

Thus far Tom's and Sarah's advice seems right on in regard to the I fund. Still trying to find the simple market "pulse" for the I fund like the one that IBD provides for the US stock market.

 

[IBD Fan]

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Update on the IBD Big Picture - market pulse:

1 Feb - 2 Feb 05: Market in correction, but attempted rally under way

Excerpt from the article in the 2 Feb issue:

"The most impressive aspect of the rebound has revovled around stocks with market caps of less than $1 billion. The small-cap S&P 600, after gaining 2% on higher volume Monday, added 0.8% on tuesday.

As noted in Tuesday's column on the Generl Market & Sectors page (today on B2), the 600's rally on Monday fit the traditional definition of a follow-through.

This confirmation of a new rally is normally seen on the Nasdaq, S&P 500 or DOW. But since the current rally began on 25 Jan, none of these have followed through.

In recent years, the 600 has joined the Nasdaq as the leading indicator of the market's jealth. While stocks slumped in early 2002, this index plowed to all-time highs.

In 2003 and 2004, the 600 trounced its larger sibling with gains of 37.5% and 21.6%. This may come as no surprise when you consider that many of the younger, faster-growing firms tend to reside in the 600.

IBD doesnt receive data on S&P 600 volume until the paper's production deadline. That makes it difficult to discuss the index's action in the Big Picture. In any case, if the market is truly ready to rally, the 600's strength should fan out to the broader arena."

I am still in 100% G but on the verge of jumping into stocks but will wait until the signal becomes clear.

Still havent got any good clues on the timing of (when to get into) the I fund so will avoid it until I do.

 

[IBD Fan]

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Update on the IBD Big Picture market pulse (note the dates shown is commenting on the previous day's action):

3 Feb: Market in correction, but attempted rally under way

4 Feb: Market in correction, but attempted rally under way. S&P 600 has followed through

7 Feb: Rally appears back on track

Excerpts:

"The Nasdaq made the most of the session, rising 1.4%. Volume expanded as the composite chugged higher late in the day. But total shares still fell short of Thursday's figure by 3%.

The NYSE showed stronger volume throughout the session. Listed trading rose 6% to 1.64 billion shares, which also was above market average. The late gains lifted the S&P 500 1.1% and DOW 1.2%.

Before the internet bubble and bear market distorted the daily trading ranges, those gains would have been good enough for a follow-through.

Volatitlity has quieted down in recent years. The market may be returning to more traditional follow-through thresholds.

However, the S&P 600 followed through unequivocally on Jan 31. As noted in Friday's column, it's hard for that index to lead on its own. But the general price-and volume action, especially on Friday, indicates the market has fallen into step with smaller stocks. Both the big-cap DOW and S&P 500 closed the week above their 50-day moving averages, a positive sign.

The S&P 600 picked up 1.3%, just good enough for an all-time closing high. That also gave the small-cap index a 4.7% surge for the week, its best showing since Aug 20 - the last time the market followed through.

With the market averages revived and leading stocks acting well, be on the lookout for breakouts. The IBD 100 is an excellent place to start your search. Also track the stocks higlighted in the NYSE and NASDAQ Stocks in the News and the Daily Stock Analysis on ionvestors.com."

Am going 10 C, 80 S, 10 I today, effective Tuesday 8 Feb.

 

[Rolo]

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8 Feb: same, Rally appears back on track

Excerpt:

The Nasdaq rose 0.2%, the Dow and S&P 500 less than 0.1%. The small-cap S&P 600 continued to lead, up 0.4%. Trading grew throughout after Monday marked the lowest volume of the year.

The news turned sour after the close, though. Cisco reported fiscal second-quarter earnings of 22 cents a share. That merely matched estimates. Sales growth climbed 12% to just under $6.1 billion, a shade below views.

The bellwether networking stock was trading down about 2% in early after-hours action. Given its heavy weighting on the Nasdaq composite, S&P 500 and other indexes, that loomed as bad news for Wednesday's session. Still, the Nasdaq was down just 0.1% in early after-hours trading.

 

[Mike]

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I hope that wasn't a lower high that we made on Friday. :shock:

 

[IBD Fan]

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Ughhhhhhh,

Guess the IBD market pulse indicator I have been trying to use for the short short term (1-3 days) doesnt work well. Even my dabble into the I fund didnt profit. I hope the market isgoing to turn up soon, but I am unwilling to stay at my aggressive positions until I am more convinced ofit. After taking a one day beating went to 50% G and and 50% F effective 10 Feb. What a humbling experience. Have yet to put my newly acquired knowledge about trying to time the marketinto a profitable strategy. Thus far this year, market timing versus buying and hold hasnt worked for me. I know its been toughsince the new year started but I havent thrown in the towel yet.

I may want to go to a "lazy" strategy that Wonder Woman pointed - seems like a good strategy if I think the market will be generally up for the yearthen just let the same selective allocations sit for the whole year (of course I would make some minor tweaks along the way).:^

Update of theIBD big picture market pulse:

8 - 10 Feb: Rally appearsback on track

Even after todays (9 Feb) drop in the markets,IBD hasmaintained the same outlook. IBD is more optimistic than I am.

Good Luck to All:dude:

 

[Rolo]

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Mike wrote:

I hope that wasn't a lower high that we made on Friday. :shock:

Agreed. Ima little concerned.



IBD Fan: hang in there. It takes a while. I'm still workin' on it too.