One of my favorite spots is the beach at Coronado. I could sit on the sand and watch the waves roll in for hours and hours. No two waves are the same. Some are large and relatively violent. Others are calm and and understated. But the pattern repeats over and over again, regardless of the size of the wave. First, there is the calm. Then, there is a sense that pressure is building below the water's surface. The underlying pressure lifts the water higher and higher until the wave is majestic in appearance. The wave gathers strength, a strength that defies gravity as the wave hangs in the air until the shore is reached and the wave comes crushing back to reality. And then the calm returns again.
Think of the market as an ocean of fear and greed.
A wave begins when investors are fearful. The future looks bleak. The market might drop down to the center of the earth. Who in their right mind would be buying stocks? Well, some are buying because they see opportunity. They are buying low. The market begins to rise and everyone is taken by surprise. This unexpected wave out of the depths of despair is Wave I. Only a few investors and traders catch it.
But waves eventually reach the shore and drop back to earth. Most will believe that the lower prices are coming again. However, the market drop stops before the low of Wave I is taken out. This wave down following the first wave up is Wave II. When this Wave II bottoms, you want to buy. This is a buying opportunity in the extreme, even though most investors will be bearish and expect lower prices.
(The Las Vegas Investment Club followed this strategy. Wave I started on July 1, 2010 when the S&P 500 Index reached a low of 1010. The market rose and made a high of 1129 on August 9, 2010. This point was the end of Wave I. Now, it was just a matter of waiting for the Wave II drop to play itself out. We waited and waited until August 25, 2010 when Wave II had reached the zone where Wave I began. Then, we moved 100% into the C Fund fully expecting a tremendous rise in the market.)
Wave III up follows Wave II down. Wave III up is the most powerful wave in terms of market psychology. Investors and traders recognize that the market is going up when the high of Wave I (1129) is breached. Most monthly records for performance are set when the the high of Wave I is taken out.
Of course, the market high is followed by another market low. This new market low is Wave IV. Finally, the market makes a final excited high. This is Wave V. When this wave reaches its top, it is time to sell. You will see alot of divergences between the price and underlying technical indicators (Relative Strength Index, MACD line, MACD histogram, full stochastics). Its time to go. In fact, this point is one of the best times to sell! The market reached the top of Wave V on April 26, 2010 in the middle of many divergences. 1219 was a great time to sell in hindsight.
What happens after the top of Wave V?
The market will drop (Wave A). The end of Wave A is a great time to buy but it is hard to seize the opportunity in real time. The bottom of Wave A was 1010 on July 1, 2010. Highs follow lows, so the market should move up. This wave up is called Wave B. I believe Wave B up was from 1010 on July 1, 2010 to 1196 on October 25, 2010. Highs are followed by lows, so the market should move down after October 25, 2010. Wave B up ended, I think, @ 1196 on Mutual Fund Monday, October 25, 2010, @ 6:45 a.m. (PST).
These waves in investor psychology make me very bearish right now. The high of 1196 should be followed by a significant low.
The next wave C should be down. According to market commentator Corey Rosenbloom, a great time to sell is @ the top of Wave B/Beginning of Wave C. I agree.
This week should see the next wave down play itself out. Its all about waves this Sunday morning.
Highs are followed by lows.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Sunday, October 31, 2010
Saturday, October 30, 2010
Contrary Opinion - Sentiment and the American Association of Individual Investors (AAII)
Contrary opinion is one of the best ways to make money in the market. Since the market cycles from top to bottom and back again, the trick is to sell when others are buying and to buy when others are selling. Sounds easy enough, huh?
One of my favorite tools for taking the pulse of investor sentiment is the American Association of Individual Investors (AAII)survey. The AAII is a nonprofit firm that seeks to educate the average investor. The firm surveys members on a weekly basis and publishes the findings. The investors are asked a simple question: Are you bullish or bearish on the direction of the market? Now, when an exceptional number of investors are bearish, then you know it is time to buy. Higher prices will follow. When an exceptional number of investors are bullish, then you know it is time to sell. Lower prices will follow. Its that simple.
Adviser Bernie Schaeffer has written that extremes in investor sentiment are shown by bullish readings over 50% and bullish readings below 25%. When the percentage of bulls ticks higher than 50%, that is actually bearish and should be taken as a good time to sell. Similarly, when the percentage of bulls ticks lower than 25%, then that is bullish and should be taken as a good time to buy.
The Las Vegas Investment Club took the buy signal on August 25 when the AAII survey showed a record number of investors were bearish. The bullish reading was 20.7%. That was our signal to buy when others were worried and selling. We made over 10% in our retirement account within 6 weeks.
What does the AAII survey say this weekend?
According to commentator Cullen Roche, "the latest AAII sentiment survey showed a 2.5 year high in bullish sentiment at 51.6%. This is the highest reading since May 8, 2008 and just shy of the all-time high in the S&P 500. Of course, the ensuing months were followed by a now legendary collapse in the markets."
There are too many bullish investors. It is time to leave the stock market for the moment. The signal to sell is strong. There is more money to be made fading the crowd and going in the opposite direction.
That's Contrary Opinion.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
One of my favorite tools for taking the pulse of investor sentiment is the American Association of Individual Investors (AAII)survey. The AAII is a nonprofit firm that seeks to educate the average investor. The firm surveys members on a weekly basis and publishes the findings. The investors are asked a simple question: Are you bullish or bearish on the direction of the market? Now, when an exceptional number of investors are bearish, then you know it is time to buy. Higher prices will follow. When an exceptional number of investors are bullish, then you know it is time to sell. Lower prices will follow. Its that simple.
Adviser Bernie Schaeffer has written that extremes in investor sentiment are shown by bullish readings over 50% and bullish readings below 25%. When the percentage of bulls ticks higher than 50%, that is actually bearish and should be taken as a good time to sell. Similarly, when the percentage of bulls ticks lower than 25%, then that is bullish and should be taken as a good time to buy.
The Las Vegas Investment Club took the buy signal on August 25 when the AAII survey showed a record number of investors were bearish. The bullish reading was 20.7%. That was our signal to buy when others were worried and selling. We made over 10% in our retirement account within 6 weeks.
What does the AAII survey say this weekend?
According to commentator Cullen Roche, "the latest AAII sentiment survey showed a 2.5 year high in bullish sentiment at 51.6%. This is the highest reading since May 8, 2008 and just shy of the all-time high in the S&P 500. Of course, the ensuing months were followed by a now legendary collapse in the markets."
There are too many bullish investors. It is time to leave the stock market for the moment. The signal to sell is strong. There is more money to be made fading the crowd and going in the opposite direction.
That's Contrary Opinion.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Friday, October 29, 2010
Market Conditions- A Bearish Day, A Bearish Week
At first glance, it seems that not much went on this week in the market. Oftentimes, there is a calm before the storm.
Today, the Standard & Poor's 500 Index opened @ 1184.74. It went nowhere for most of the day. The high of the day was 1185.46. The low of the day was 1179.70. Again, the low of the day dipped below the rising 13-day moving average. The close was 1183.26. Note that the close (1183.26) was lower than the open (1184.74). This lower close means that selling pressure was greater than buying pressure for the day.
For the week, things got off to a rock and roll start Monday morning. The S&P soared within the first 15 minutes of the trading day to 1196. I had mentioned 1196 to "Shelby" as a probable stopping point for Index. Well, 1196 stopped the S&P advance dead in its tracks. From Monday morning the market dropped to a low of 1171.70 for the week and bounced up to a 50% retracement level or 1183.26. The market is now primed to drop further. Oftentimes, a bounce will go up to 50% of the drop before continuing to head further downwards.
The open for the week was 1184.74. The high was 1196.14. The low was 1171.70. The close was 1183.26. The weekly close (1183.26) was lower than the weekly open (1184.74). This lower close means that selling pressure was greater than buying pressure for the week. On Wall Street, there is an old adage that Bulls die hard. We are witnessing the last gasp of this advance in the S&P.
Next week should be interesting!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Today, the Standard & Poor's 500 Index opened @ 1184.74. It went nowhere for most of the day. The high of the day was 1185.46. The low of the day was 1179.70. Again, the low of the day dipped below the rising 13-day moving average. The close was 1183.26. Note that the close (1183.26) was lower than the open (1184.74). This lower close means that selling pressure was greater than buying pressure for the day.
For the week, things got off to a rock and roll start Monday morning. The S&P soared within the first 15 minutes of the trading day to 1196. I had mentioned 1196 to "Shelby" as a probable stopping point for Index. Well, 1196 stopped the S&P advance dead in its tracks. From Monday morning the market dropped to a low of 1171.70 for the week and bounced up to a 50% retracement level or 1183.26. The market is now primed to drop further. Oftentimes, a bounce will go up to 50% of the drop before continuing to head further downwards.
The open for the week was 1184.74. The high was 1196.14. The low was 1171.70. The close was 1183.26. The weekly close (1183.26) was lower than the weekly open (1184.74). This lower close means that selling pressure was greater than buying pressure for the week. On Wall Street, there is an old adage that Bulls die hard. We are witnessing the last gasp of this advance in the S&P.
Next week should be interesting!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Thursday, October 28, 2010
Just Another Bearish Day
The close (1183.78) on the S&P 500 Index was lower than the open (1184.47). As discussed yesterday, this condition is an indication that there is more selling pressure than buying pressure. The market is turning around and headed downward.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Wednesday, October 27, 2010
Market Conditions: Another Bearish Day
Today was another bearish day in the market. The S&P 500 Index gave grave challenge to the 1171 support level before a flurry of late day short covering. (Short covering means that people who were betting that the market would fall covered their bets and converted paper profits into real money.) Short covering provides buying pressure which is why the market rose in the last hour of the trading day.
1171 on the Standard & Poors 500 Index is now the line in the sand. 1171 has been challenged twice. The third challenge will be the charm. 1171 will fail on the third challenge. When 1171 fails, we will witness the PLUNGE. For an example of what the PLUNGE might look like, see the early days in May of 2010 when the market breached the 1181 line in the sand. Within 3 days, the market had dropped 120 points. (I had puts at the time, so I was happy/smile.)
The untrained eye might watch the news this evening and see that the market closed @ 1182. What's so bad about that? The trained eye sees far more in the closing price. First, the close was less than the open @ 1183. Whenever the closing price is lower than the opening price, we know that selling pressure was greater than buying pressure. Second, the volume on this down day was greater than yesterday's volume. The famous investor, William O'Neil, has written that institutions leave a footprint when they start to sell. One footprint would be a "distribution day." Distribution days are down days on greater volume than the previous day. Distribution days lead to more selling over time. Finally, the market in the final hour of the trading day went up while the MACD histogram remained negative, the stochastic reading remained negative and falling out of overbought conditions, and the MACD line remained in a declining condition. These are negative divergences. They suggest that the rise at the end of the day was false and not sustainable.
To sum up, today was just another bearish day. Those hoping for higher prices have more to fear than those betting on lower prices ahead. That's just life. That's just the market.
Good evening!
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
1171 on the Standard & Poors 500 Index is now the line in the sand. 1171 has been challenged twice. The third challenge will be the charm. 1171 will fail on the third challenge. When 1171 fails, we will witness the PLUNGE. For an example of what the PLUNGE might look like, see the early days in May of 2010 when the market breached the 1181 line in the sand. Within 3 days, the market had dropped 120 points. (I had puts at the time, so I was happy/smile.)
The untrained eye might watch the news this evening and see that the market closed @ 1182. What's so bad about that? The trained eye sees far more in the closing price. First, the close was less than the open @ 1183. Whenever the closing price is lower than the opening price, we know that selling pressure was greater than buying pressure. Second, the volume on this down day was greater than yesterday's volume. The famous investor, William O'Neil, has written that institutions leave a footprint when they start to sell. One footprint would be a "distribution day." Distribution days are down days on greater volume than the previous day. Distribution days lead to more selling over time. Finally, the market in the final hour of the trading day went up while the MACD histogram remained negative, the stochastic reading remained negative and falling out of overbought conditions, and the MACD line remained in a declining condition. These are negative divergences. They suggest that the rise at the end of the day was false and not sustainable.
To sum up, today was just another bearish day. Those hoping for higher prices have more to fear than those betting on lower prices ahead. That's just life. That's just the market.
Good evening!
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Tuesday, October 26, 2010
Market Conditions - European Markets Are Down
All of the european markets (London, Paris, Berlin) are down as I type. Across the board selling suggests selling pressure across the globe. In my experience, the european selling pressure should spread to U.S. markets this morning. Today should be a down day in the market. If today is a down day, this condition would confirm the bearish implications of yesterday's gravestone doji.
In simple terms, the value of the C Fund will fall, not rise. The Las Vegas Investment Club will be protected with its 100% position in the G Fund.
I will continue to monitor the situation.
********
Below is a real time exchange with a local investor concerned about the market's future. I have not used her real name in order to preserve her confidentiality and privacy:
RE: Thinking About the Stock Market on Saturday NightSunday, October 24, 2010 2:24 PM
From: "Shelby"View contact detailsTo: "'Winkfield Twyman'" Hi Wink:
Sorry for the delay in getting back to you, but I wanted to talk to my neighbor and get his ideas about determining when a plunge will occur in advance. He checked the charts and believes the market will drop 5-6 points by the end of this week. He saw that the Dow Jones charts tried 7 times to penetrate the resistance, but didn’t. This sideways movement of various stocks and the Dow Jones, in addition to a small divergence that he’s noticing, has led him to believe the market will go down this week.
I agree with you on your economic assessment. The commercial real estate market is also wreaking havoc, as banks are grappling with the commercial investors now even more than the residential homeowners.
I read ‘The Big Short’ and really enjoyed learning about the derivatives market. The two books I have tried to get through and were recommended by my knowledgeable neighbor are: Technical Analysis of the Financial Markets by John J. Murphy and Japanese Candlestick Charting Techniques by Steve Nison. Have you heard about them? Thanks for all the advice. You’re obviously very knowledgeable and do well in the market. Is this what you do full-time?
Let me pass along something one of my law school buddies told me last week. He said we ignore demographic trends at our peril. With the baby boomers retiring over the next decade, pension plans will begin to sell off assets big-time. As they sell these stocks, the over-all price will plunge. He suggests being extremely cautious and watching volume, as we may be in for a ride. Makes me want to cash out all my 401K’s now. Any thoughts on this?
"Shelby"
From: Winkfield Twyman [mailto:winkfieldtwyman@yahoo.com]
Sent: Saturday, October 16, 2010 11:13 PM
To: "Shelby"
Subject: RE: Thinking About the Stock Market on Saturday Night
Hi "Shelby":
I'm not using any special programs, just experience and observation. I have a core library of about 25 books on trading and investing that I read over and over again.
I'm not looking at any particularly stocks, although ARMH seems attractive right now. Talk about a strong up trend! I'm thinking about SPY for an option play. If the S&P tops out in this area, then the drop could be quick and profitable. It's best to buy puts on an up day but that's hard to do from an emotional standpoint. And every market drop is different. Compare the January 19/February 5 drop with the April 26/May 6 drop, and the June 21/July 1 drop. They are all different in character. So, its a real test of one's mettle to play a drop. You never know what you're gonna get. (I recommend Elder's great book, Come Into My Trading Room, pages 196-97, for a good discussion on options as a major reversal tactic.)
Do you have any ideas on anticipating the character of a plunge 1-7 days before hand? I've tried and tried and it just seems totally luck of the draw. Maybe, it's just impossible to forecast the way in which a market decline unfolds. (When I say "character of the plunge," I mean whether the plunge is straight down in 1-3 days or falls down in a stair case five-wave pattern.) My best guess is the alternation principle (the market never repeats the same pattern twice in a row) which means the next decline should resemble the April fall more than the June fall.
I do think the volatility will increase until the economy improves. There's a guy named Martin Armstrong who argues that the volatility will just increase and increase because of structural imbalances in the system (federal deficit, the Fed printing money, massive derivatives, insolvent financial institutions, etc.)
I think the economic recession (depression?) will last until 2022. It will take a decade to wring the excesses out of the system. The economy has seasons just like the weather. There is a Winter time of debts, foreclosures, and tremendous opportunities in silver and gold. We are in the economic Winter time right now. There is Spring time when you must buy all depressed properties at crazy cheap prices and prepare for the next Great Bull Market. I don't think that time will come until 2022 for cyclical reasons. (See The Right Stock at the Right Time by Larry Williams.) Then there is the Summer and Fall time. The general theory is known as the Kondratieff Wave.
You can make money in the stock market during this economic winter but you will have to be an active investor and follow some simple rules (positive divergence, buy the second dip, sell overbought conditions in a down trend, etc.) Cycles work very well too but you have to have patience and discipline. Try buying every 40-week cycle. More often than not, those dips are good buying opportunities.
Good luck with your investing and trading! I suspect you have read many of the same books that I have. My favorites are How I Made $2,000,000 in the Stock Market, The Right Stock at the Right Time (Kudos to Larry Williams!), Come Into My Trading Room, The Greatest Trade Ever, and The Big Short.
Knowledge is power.
Good trades,
Wink
--- On Sat, 10/16/10, "Shelby" wrote:
From: "Shelby"
Subject: RE: The Thrift Savings (TSP) Investment Club : Opportunity is a Powerful Force
To: "'Winkfield Twyman'"
Date: Saturday, October 16, 2010, 6:47 PM
Hi Wink:
Thanks for the analysis on the resistance levels. I’ll watch as the S&P approaches the high 1100’s. I’ll bet you’re right. From everything I’ve read, people watch some form of the moving average (whether it’s 100 day or 200 day) and then watch for the double peak. Are you using any special programs? Are you looking at any particular stocks? I’ve been watching Ford, MGM, UNG and some Brazilian companies. Made a bit of money on these last year, but have been pretty nervous about the volatility over the last 6 months, so I’ve been sitting on the side-lines.
Do you see the volatility continuing until the economy improves? What’s your sense as to how much longer this recession will last? (I realize the government statisticians say the recession ended last year, but I have to wonder. The commercial real estate market is supposed to be pretty awful, so that should have some impact on how quickly the economy will improve.) I appreciate your thoughts.
"Shelby"
From: Winkfield Twyman [mailto:winkfieldtwyman@yahoo.com]
Sent: Saturday, October 16, 2010 2:33 PM
To: "Shelby"
Subject: RE: The Thrift Savings (TSP) Investment Club : Opportunity is a Powerful Force
Hey "Shelby":
Here's my short-term thinking for what its worth---
1. Moving averages provide resistance. They tend to stop the advance of the market in its tracks. The 200-day moving average is at 1196. I would expect that the advance of the market would be halted at 1196.
2. I don't know why but I have found that resistance levels on a Gann chart provide a reliable gauge of resistance. I speak from experience. I have used Gann levels to make money in the past (long story). Anyway, the next significant Gann resistance level is at 1196. I would expect the march of the market to cease at 1196. The market could always do the unexpected and move higher but, for me, that would be an unexpected occurrence.
3. The third time is the charm in the market. As I type, the high for the year on the S&P 500 Index is 1219. That was also the 200-day moving average at the time. The market stopped at that level and dropped into the Flash Crash of May 6, 2010. The market is now challenging the 200-day moving average for the second time. From what I have seen, the second challenge fails. Its the third challenge that succeeds. So, once again, I would expect a second challenge to the 200-day moving average to fail. I could be wrong and that would be fine. No one is right all the time. But my expectations are that a second challenge fails.
I know this is way more detail than you wanted but I was inspired on a Saturday afternoon (smile). All the best and watch how the Standard & Poor's reacts when it touches the 1196 area.
Later,
Wink
--- On Fri, 10/15/10, "Shelby" wrote:
From: "Shelby"
Subject: RE: The Thrift Savings (TSP) Investment Club : Opportunity is a Powerful Force
To: "'Wink'"
Date: Friday, October 15, 2010, 8:52 AM
Hi Wink:
Hope to see you at an event soon. I’d really like to hear about your thoughts on Bishop’s. I didn’t realize you were an investor. I’m an amateur (emphasis on the amateur), and also have been trying to determine the next divergence in the market. My neighbor helps me from time to time with the technical analysis, and I’ve found a program that’s pretty good to help with the decisions. I need a lot more time, though, to do it right.
"Shelby"
From: Wink [mailto:winkfieldtwyman@yahoo.com]
Sent: Thursday, October 14, 2010 7:23 PM
To: e-mail address deleted
Subject: The Thrift Savings (TSP) Investment Club : Opportunity is a Powerful Force
Wink has sent you a link to a blog:
"Shelby", I'm looking forward to the next Harvard Club event, particularly if its kid friendly. I have a teenager at Bishop's. Maybe, he might catch the Harvard fever/smile. I'm providing a link to my blog on the market and investing. Wink
Blog: The Thrift Savings (TSP) Investment Club
Post: Opportunity is a Powerful Force
Link: http://thelasvegastspinvestmentclub.blogspot.com/2010/10/opportunity-is-powerful-force.html
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
In simple terms, the value of the C Fund will fall, not rise. The Las Vegas Investment Club will be protected with its 100% position in the G Fund.
I will continue to monitor the situation.
********
Below is a real time exchange with a local investor concerned about the market's future. I have not used her real name in order to preserve her confidentiality and privacy:
RE: Thinking About the Stock Market on Saturday NightSunday, October 24, 2010 2:24 PM
From: "Shelby"
Sorry for the delay in getting back to you, but I wanted to talk to my neighbor and get his ideas about determining when a plunge will occur in advance. He checked the charts and believes the market will drop 5-6 points by the end of this week. He saw that the Dow Jones charts tried 7 times to penetrate the resistance, but didn’t. This sideways movement of various stocks and the Dow Jones, in addition to a small divergence that he’s noticing, has led him to believe the market will go down this week.
I agree with you on your economic assessment. The commercial real estate market is also wreaking havoc, as banks are grappling with the commercial investors now even more than the residential homeowners.
I read ‘The Big Short’ and really enjoyed learning about the derivatives market. The two books I have tried to get through and were recommended by my knowledgeable neighbor are: Technical Analysis of the Financial Markets by John J. Murphy and Japanese Candlestick Charting Techniques by Steve Nison. Have you heard about them? Thanks for all the advice. You’re obviously very knowledgeable and do well in the market. Is this what you do full-time?
Let me pass along something one of my law school buddies told me last week. He said we ignore demographic trends at our peril. With the baby boomers retiring over the next decade, pension plans will begin to sell off assets big-time. As they sell these stocks, the over-all price will plunge. He suggests being extremely cautious and watching volume, as we may be in for a ride. Makes me want to cash out all my 401K’s now. Any thoughts on this?
"Shelby"
From: Winkfield Twyman [mailto:winkfieldtwyman@yahoo.com]
Sent: Saturday, October 16, 2010 11:13 PM
To: "Shelby"
Subject: RE: Thinking About the Stock Market on Saturday Night
Hi "Shelby":
I'm not using any special programs, just experience and observation. I have a core library of about 25 books on trading and investing that I read over and over again.
I'm not looking at any particularly stocks, although ARMH seems attractive right now. Talk about a strong up trend! I'm thinking about SPY for an option play. If the S&P tops out in this area, then the drop could be quick and profitable. It's best to buy puts on an up day but that's hard to do from an emotional standpoint. And every market drop is different. Compare the January 19/February 5 drop with the April 26/May 6 drop, and the June 21/July 1 drop. They are all different in character. So, its a real test of one's mettle to play a drop. You never know what you're gonna get. (I recommend Elder's great book, Come Into My Trading Room, pages 196-97, for a good discussion on options as a major reversal tactic.)
Do you have any ideas on anticipating the character of a plunge 1-7 days before hand? I've tried and tried and it just seems totally luck of the draw. Maybe, it's just impossible to forecast the way in which a market decline unfolds. (When I say "character of the plunge," I mean whether the plunge is straight down in 1-3 days or falls down in a stair case five-wave pattern.) My best guess is the alternation principle (the market never repeats the same pattern twice in a row) which means the next decline should resemble the April fall more than the June fall.
I do think the volatility will increase until the economy improves. There's a guy named Martin Armstrong who argues that the volatility will just increase and increase because of structural imbalances in the system (federal deficit, the Fed printing money, massive derivatives, insolvent financial institutions, etc.)
I think the economic recession (depression?) will last until 2022. It will take a decade to wring the excesses out of the system. The economy has seasons just like the weather. There is a Winter time of debts, foreclosures, and tremendous opportunities in silver and gold. We are in the economic Winter time right now. There is Spring time when you must buy all depressed properties at crazy cheap prices and prepare for the next Great Bull Market. I don't think that time will come until 2022 for cyclical reasons. (See The Right Stock at the Right Time by Larry Williams.) Then there is the Summer and Fall time. The general theory is known as the Kondratieff Wave.
You can make money in the stock market during this economic winter but you will have to be an active investor and follow some simple rules (positive divergence, buy the second dip, sell overbought conditions in a down trend, etc.) Cycles work very well too but you have to have patience and discipline. Try buying every 40-week cycle. More often than not, those dips are good buying opportunities.
Good luck with your investing and trading! I suspect you have read many of the same books that I have. My favorites are How I Made $2,000,000 in the Stock Market, The Right Stock at the Right Time (Kudos to Larry Williams!), Come Into My Trading Room, The Greatest Trade Ever, and The Big Short.
Knowledge is power.
Good trades,
Wink
--- On Sat, 10/16/10, "Shelby"
From: "Shelby"
Subject: RE: The Thrift Savings (TSP) Investment Club : Opportunity is a Powerful Force
To: "'Winkfield Twyman'"
Date: Saturday, October 16, 2010, 6:47 PM
Hi Wink:
Thanks for the analysis on the resistance levels. I’ll watch as the S&P approaches the high 1100’s. I’ll bet you’re right. From everything I’ve read, people watch some form of the moving average (whether it’s 100 day or 200 day) and then watch for the double peak. Are you using any special programs? Are you looking at any particular stocks? I’ve been watching Ford, MGM, UNG and some Brazilian companies. Made a bit of money on these last year, but have been pretty nervous about the volatility over the last 6 months, so I’ve been sitting on the side-lines.
Do you see the volatility continuing until the economy improves? What’s your sense as to how much longer this recession will last? (I realize the government statisticians say the recession ended last year, but I have to wonder. The commercial real estate market is supposed to be pretty awful, so that should have some impact on how quickly the economy will improve.) I appreciate your thoughts.
"Shelby"
From: Winkfield Twyman [mailto:winkfieldtwyman@yahoo.com]
Sent: Saturday, October 16, 2010 2:33 PM
To: "Shelby"
Subject: RE: The Thrift Savings (TSP) Investment Club : Opportunity is a Powerful Force
Hey "Shelby":
Here's my short-term thinking for what its worth---
1. Moving averages provide resistance. They tend to stop the advance of the market in its tracks. The 200-day moving average is at 1196. I would expect that the advance of the market would be halted at 1196.
2. I don't know why but I have found that resistance levels on a Gann chart provide a reliable gauge of resistance. I speak from experience. I have used Gann levels to make money in the past (long story). Anyway, the next significant Gann resistance level is at 1196. I would expect the march of the market to cease at 1196. The market could always do the unexpected and move higher but, for me, that would be an unexpected occurrence.
3. The third time is the charm in the market. As I type, the high for the year on the S&P 500 Index is 1219. That was also the 200-day moving average at the time. The market stopped at that level and dropped into the Flash Crash of May 6, 2010. The market is now challenging the 200-day moving average for the second time. From what I have seen, the second challenge fails. Its the third challenge that succeeds. So, once again, I would expect a second challenge to the 200-day moving average to fail. I could be wrong and that would be fine. No one is right all the time. But my expectations are that a second challenge fails.
I know this is way more detail than you wanted but I was inspired on a Saturday afternoon (smile). All the best and watch how the Standard & Poor's reacts when it touches the 1196 area.
Later,
Wink
--- On Fri, 10/15/10, "Shelby"
From: "Shelby"
Subject: RE: The Thrift Savings (TSP) Investment Club : Opportunity is a Powerful Force
To: "'Wink'"
Date: Friday, October 15, 2010, 8:52 AM
Hi Wink:
Hope to see you at an event soon. I’d really like to hear about your thoughts on Bishop’s. I didn’t realize you were an investor. I’m an amateur (emphasis on the amateur), and also have been trying to determine the next divergence in the market. My neighbor helps me from time to time with the technical analysis, and I’ve found a program that’s pretty good to help with the decisions. I need a lot more time, though, to do it right.
"Shelby"
From: Wink [mailto:winkfieldtwyman@yahoo.com]
Sent: Thursday, October 14, 2010 7:23 PM
To: e-mail address deleted
Subject: The Thrift Savings (TSP) Investment Club : Opportunity is a Powerful Force
Wink has sent you a link to a blog:
"Shelby", I'm looking forward to the next Harvard Club event, particularly if its kid friendly. I have a teenager at Bishop's. Maybe, he might catch the Harvard fever/smile. I'm providing a link to my blog on the market and investing. Wink
Blog: The Thrift Savings (TSP) Investment Club
Post: Opportunity is a Powerful Force
Link: http://thelasvegastspinvestmentclub.blogspot.com/2010/10/opportunity-is-powerful-force.html
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Monday, October 25, 2010
Gravestone Doji - A Bearish Day
Today's price action was bearish. The S&P 500 Index opened up with gusto at 1184. 1184 was higher than Friday's close of 1183. Resistance was at 1195 on a weekly chart of the S&P. The S&P 500 Index actually soared up and touched 1196 during the first hour of the trading day. It should be remembered that retail and inexperienced investors populate the first hour of the trading day. Funds from mutual funds also enter the market on Monday mornings. So, the early morning surge was unsurprising.
More telling to me was the market's behavior after the first hour of the trading day. Q: Would the gains hold throughout the day? Q: Would the market sell off throughout the day and close @ its low? By 1:00 p.m. (PST), I had my answer. The gains did not hold. Institutions were selling into the close. It is bearish when institutions sell into the close.
The price action today was a gravestone doji. Gravestone doji is just a fancy way of saying that the market was excited in the morning but lost all of its gains by the close. Market experts consider this to be a foreboding event. It suggests that lower prices are ahead.
The longer the market hangs in mid-air, the more severe will be the drop. This anticipation makes sense. More and more people are committing themselves to higher prices. But they are late to the party. The time to be all in was back in late August. The histogram closed negative again (simply amazing). Even the MACD trend line is now heading down.
Tops are a process. They don't happen all at once. So, you have to look for signs. The signs are everywhere.
Have a good evening!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
More telling to me was the market's behavior after the first hour of the trading day. Q: Would the gains hold throughout the day? Q: Would the market sell off throughout the day and close @ its low? By 1:00 p.m. (PST), I had my answer. The gains did not hold. Institutions were selling into the close. It is bearish when institutions sell into the close.
The price action today was a gravestone doji. Gravestone doji is just a fancy way of saying that the market was excited in the morning but lost all of its gains by the close. Market experts consider this to be a foreboding event. It suggests that lower prices are ahead.
The longer the market hangs in mid-air, the more severe will be the drop. This anticipation makes sense. More and more people are committing themselves to higher prices. But they are late to the party. The time to be all in was back in late August. The histogram closed negative again (simply amazing). Even the MACD trend line is now heading down.
Tops are a process. They don't happen all at once. So, you have to look for signs. The signs are everywhere.
Have a good evening!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Sunday, October 24, 2010
Principles for Investing and Life
One of my favorite books is The Richest Man in Babylon by George S. Clason. It was written in 1926 during the Roaring 20s. The principles for investing and life are timeless which may explain why it was reprinted throughout the Great Depression in 1930, 1931, 1932, 1933, 1936, and 1937. Think about that! No one, except for the fortunate wealthy, had money to spare during the Great Depression. And yet the demand for this little book was so great that the publisher had to reprint and reprint the book. The book is only 144 pages, so its a quick read. I recommend it.
What are the powerful principles for a prosperous life? Every day, we make countless choices: Will I buy lunch at a restaurant or brown bag my lunch? Will I buy a newspaper or surf the web for news? Will I buy a new computer or rehab the old computer in the kids' room? Do I go to my favorite overpriced dry cleaners or the less expensive dry cleaners down the block? Do I zone out on another episode of Law and Order or digest an educational hour of financial news? The cumulative impact of our daily choices will determine our financial destiny.
The Richest Man in Babylon is the story of a chariot builder in ancient times who is struggling. He wants the security of wealth but he doesn't know what to do. A friend suggests that the answer might be found by asking the richest man in Babylon. The suggestion is smart, particularly since the richest man had started out in life as a nobody, another kid in the neighborhood like everyone else. (I understand this narrative because one of my favorite uncles started with nothing during the Great Depression and died owning 16 properties.)
The struggling chariot builder learns from his childhood friend that these are the principles for prosperity:
1. Save a portion of your income (preferably 10%).
2. Control your expenditures.
3. Make your money multiply by wise investment decisions.
4. Safeguard your savings and investments from loss.
5. Own, don't rent.
6. Insure a future income so that you are provided for in your old age.
7. Increase your ability to earn by investing in your knowledge.
8. Our prosperity as a nation depends upon the personal financial prosperity of each of us as individuals.
9. Success means accomplishments as a result of our own efforts and abilities.
10. Proper preparation is the key to our success.
We live in an age of computers, not chariots. Nonetheless, the same thoughts can generate financial rewards today. Try to live by these principles every day. I know its hard if you're just graduating from college or graduate school. You may be unemployed and have overwhelming debt. I have been there. I remember how I used to live on a dollar a day. I kept digging a deeper and deeper hole for myself until it occurred to me that there must be a better way. I began by controlling my expenditures. I then forced myself to save 1% of my income. 1% was a pittance but it got me into the habit of saving. 1% became 2%. 2% became 3%. As I paid off more and more debts, the savings rate increased until it hit 10%. That was my savings goal.
Once you have savings and are controlling your expenditures, you will feel more secure and confident. I'm not bragging about my learning curve. My mom would save 50% of her income when she was single. She was way smarter than her hapless son living in Gaithersburg, Maryland on $1 a day/smile. My favorite uncle had an ungodly savings rate. And he plowed those savings back into his properties and bank accounts.
Well, that's it for this Sunday morning. There is nothing new under the sun when it comes to principles for prosperity. Don't debt. Save, preferably, 10% of your income. Invest your savings in wise investments.
Read The Richest Man in Babylon. Its a good investment in your financial future.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
What are the powerful principles for a prosperous life? Every day, we make countless choices: Will I buy lunch at a restaurant or brown bag my lunch? Will I buy a newspaper or surf the web for news? Will I buy a new computer or rehab the old computer in the kids' room? Do I go to my favorite overpriced dry cleaners or the less expensive dry cleaners down the block? Do I zone out on another episode of Law and Order or digest an educational hour of financial news? The cumulative impact of our daily choices will determine our financial destiny.
The Richest Man in Babylon is the story of a chariot builder in ancient times who is struggling. He wants the security of wealth but he doesn't know what to do. A friend suggests that the answer might be found by asking the richest man in Babylon. The suggestion is smart, particularly since the richest man had started out in life as a nobody, another kid in the neighborhood like everyone else. (I understand this narrative because one of my favorite uncles started with nothing during the Great Depression and died owning 16 properties.)
The struggling chariot builder learns from his childhood friend that these are the principles for prosperity:
1. Save a portion of your income (preferably 10%).
2. Control your expenditures.
3. Make your money multiply by wise investment decisions.
4. Safeguard your savings and investments from loss.
5. Own, don't rent.
6. Insure a future income so that you are provided for in your old age.
7. Increase your ability to earn by investing in your knowledge.
8. Our prosperity as a nation depends upon the personal financial prosperity of each of us as individuals.
9. Success means accomplishments as a result of our own efforts and abilities.
10. Proper preparation is the key to our success.
We live in an age of computers, not chariots. Nonetheless, the same thoughts can generate financial rewards today. Try to live by these principles every day. I know its hard if you're just graduating from college or graduate school. You may be unemployed and have overwhelming debt. I have been there. I remember how I used to live on a dollar a day. I kept digging a deeper and deeper hole for myself until it occurred to me that there must be a better way. I began by controlling my expenditures. I then forced myself to save 1% of my income. 1% was a pittance but it got me into the habit of saving. 1% became 2%. 2% became 3%. As I paid off more and more debts, the savings rate increased until it hit 10%. That was my savings goal.
Once you have savings and are controlling your expenditures, you will feel more secure and confident. I'm not bragging about my learning curve. My mom would save 50% of her income when she was single. She was way smarter than her hapless son living in Gaithersburg, Maryland on $1 a day/smile. My favorite uncle had an ungodly savings rate. And he plowed those savings back into his properties and bank accounts.
Well, that's it for this Sunday morning. There is nothing new under the sun when it comes to principles for prosperity. Don't debt. Save, preferably, 10% of your income. Invest your savings in wise investments.
Read The Richest Man in Babylon. Its a good investment in your financial future.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Saturday, October 23, 2010
Contrary Opinion and Media Coverage
Money is made by going contrary to the majority opinion. If 90% of investors are bullish, then you will make (conserve) your money by remaining in the G Fund. The G Fund is a basket of government securities that has low, if any, risk. Martin J. Pring in Investment Psychology Explained: Classic Strategies to Beat the Market writes that "forming a well-considered contrary opinion is similar to establishing an informal measure of market risk. When all participants agree on a specific out look, it means that they are all positioned to take advantage of it...In extreme cases, these newfound arguments combine with the allure of rapidly moving prices to entice more players onto the field." (page 135) And these new guys buy into the C Fund at the worst possible time when prices are at the greatest risk of a fall.
By the time a major newspaper covers the stock market rise or advance, then it is time to think about a possible downturn in the market. Pring says "(t)he interesting thing about such stories is that they invariably occur after a substantial price movement has taken place...To the contrarian, the appearance of such stories is not a signal to buy; rather, it is a sign that (it) is time to think about selling." (page 140).
You want to be the first guest at the party, not the last one to stumble in. You also do not want to be left holding the bag when the party is over.
The market functions in the same way. Always strive to be the first one in when the market is about to rise. Strive to be the first one out when the market is about to fall. That's how winning is done. That's how money is made. That's how wise investors invest.
Have a Good Day!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
By the time a major newspaper covers the stock market rise or advance, then it is time to think about a possible downturn in the market. Pring says "(t)he interesting thing about such stories is that they invariably occur after a substantial price movement has taken place...To the contrarian, the appearance of such stories is not a signal to buy; rather, it is a sign that (it) is time to think about selling." (page 140).
You want to be the first guest at the party, not the last one to stumble in. You also do not want to be left holding the bag when the party is over.
The market functions in the same way. Always strive to be the first one in when the market is about to rise. Strive to be the first one out when the market is about to fall. That's how winning is done. That's how money is made. That's how wise investors invest.
Have a Good Day!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Friday, October 22, 2010
Five Quick Reasons Why Next Week Should Be Down
Here are my five top reasons why the market should be down next week:
1. The heaviest volume this week was on a down day (Tuesday). This pattern suggests distribution by institutional investors.
2. Since Tuesday, the volume has been been dropping each day while the market has been drifting higher. You need higher volume to support higher prices. With lower volume, you will eventually get lower prices.
3. Today was an inside day. The high and low of the day were contained within the price extremes of yesterday's price action. Inside days are rare in the market place. They are a good sign that a new trend will begin within a day or two.
4. The market has not been able to close with conviction above 1181. Today's day was an inside day and does not count as a close with conviction. This suggests that the Bulls are less taken with the market than in September.
5. Finally, the Histogram continues to be negative.
Taken together, these conditions all point to lower prices next week.
Have a good weekend!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
1. The heaviest volume this week was on a down day (Tuesday). This pattern suggests distribution by institutional investors.
2. Since Tuesday, the volume has been been dropping each day while the market has been drifting higher. You need higher volume to support higher prices. With lower volume, you will eventually get lower prices.
3. Today was an inside day. The high and low of the day were contained within the price extremes of yesterday's price action. Inside days are rare in the market place. They are a good sign that a new trend will begin within a day or two.
4. The market has not been able to close with conviction above 1181. Today's day was an inside day and does not count as a close with conviction. This suggests that the Bulls are less taken with the market than in September.
5. Finally, the Histogram continues to be negative.
Taken together, these conditions all point to lower prices next week.
Have a good weekend!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Thursday, October 21, 2010
The Drop Begins
I was listening to a news channel today. The reporter reported that the S&P was up 2 points. How misleading! Today was a very bearish day in the market.
Let me explain.
In the financial markets, there is a setup known as a bull trap. This happens when the market goes to a higher level than a prior high and then drops back below the level of the previous high. Many investors are buying in anticipation of higher prices. What they get are losses. The new buyers panic and place sell orders. That's what happened today. The market gapped up at the open, busted through the old high of 1185, and made a new high of 1189. If the price increase was authentic and genuine, then the market should not have dropped below 1185. However, at 11:00 a.m. (PST), the market dropped back down below 1185 and eventually fell all the way to 1171 before closing at a 50% retracement level @ 1180. There are alot of investors and traders who bought the market this morning above 1185. Those investors and traders are now underwater.
What does the future hold?
1180 is now resistance. There is more supply than demand at this level. The market should drop from this level and find 1157 or so. When the market closes below the 13-day moving average(now at 1170.47), the general public will wake up and recognize that the trend has changed. The market is now heading down for a while.
I don't think the market will crash. I am bullish for the long haul. But if the market is going to drop, there is no point served by remaining in the C Fund and watching the value of your funds decline. My target for the drop is 1065 (resistance during the last week in August). My time target is November 2. Then, it will be a good time to move 100% into the C Fund again.
The market should finish up the year on a high note. The next time the market challenges the 200-day moving average, it should be surpassed.
Good investing!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Let me explain.
In the financial markets, there is a setup known as a bull trap. This happens when the market goes to a higher level than a prior high and then drops back below the level of the previous high. Many investors are buying in anticipation of higher prices. What they get are losses. The new buyers panic and place sell orders. That's what happened today. The market gapped up at the open, busted through the old high of 1185, and made a new high of 1189. If the price increase was authentic and genuine, then the market should not have dropped below 1185. However, at 11:00 a.m. (PST), the market dropped back down below 1185 and eventually fell all the way to 1171 before closing at a 50% retracement level @ 1180. There are alot of investors and traders who bought the market this morning above 1185. Those investors and traders are now underwater.
What does the future hold?
1180 is now resistance. There is more supply than demand at this level. The market should drop from this level and find 1157 or so. When the market closes below the 13-day moving average(now at 1170.47), the general public will wake up and recognize that the trend has changed. The market is now heading down for a while.
I don't think the market will crash. I am bullish for the long haul. But if the market is going to drop, there is no point served by remaining in the C Fund and watching the value of your funds decline. My target for the drop is 1065 (resistance during the last week in August). My time target is November 2. Then, it will be a good time to move 100% into the C Fund again.
The market should finish up the year on a high note. The next time the market challenges the 200-day moving average, it should be surpassed.
Good investing!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Wednesday, October 20, 2010
Third Red Flag
Today, we had a third red flag. The low of the day on the S&P 500 Index hit below the rising 13-day moving average. It is what it is. Time to go, IMHO.
I'm watching Jim Cramer on CNBC. He is wildly bullish and mocking the pundits who believe these levels are dangerous. Cramer is great entertainment. However, I would never invest based on his manic performances. If anything, you should think about fading or going against media commentators when they are wildly bullish.
Just contrarian thinking.
I am sick this evening, so I will not write anything else.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
I'm watching Jim Cramer on CNBC. He is wildly bullish and mocking the pundits who believe these levels are dangerous. Cramer is great entertainment. However, I would never invest based on his manic performances. If anything, you should think about fading or going against media commentators when they are wildly bullish.
Just contrarian thinking.
I am sick this evening, so I will not write anything else.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Tuesday, October 19, 2010
Market Conditions - Second Red Flag
The market showed a strong second red flag today. The S&P 500 Index dipped below the 13-day moving average. While the market may drift higher this week, these are times to be extra cautious. I would not recommend jumping into the C Fund at these levels. The S&P 500 Index closed @ 1165. I got out of the C Fund @ 1176.
Several points were noteworthy about today's action:
1. The market had its biggest selling day in two months.
2, Today counted as a "true selling" day. According to trader Gary Smith, it is wise to step away from the stock market when at least three major market indexes have dropped by more than 1%. Today, all of the major indexes were down by more than 1%. To quote Smith, "A 1 percent true selling day occurs after a period of rising prices of at least two weeks in which the Dow, S&P, Nasdaq 100, and Russell 2000 indexes all close down 1 percent or more on the same trading day. These types of days often are trend busters and can be harbingers of serious price declines ahead." How I Trade For a Living by Gary Smith, page 112.
3. There was a sharp drop in the Relative Strength Index (RSI). Remember how we closed yesterday at an unsustainable level of 70.89? Well, today the market had a "Come to Jesus" moment. The RSI closed in the 50s. This is a warning sign that all is not well with the market.
4. The flatlining MACD histogram has turned negative. For me, this point alone would be a "time to go" sign. But I'm very conservative when the market might be turning down.
5. The MACD line has turned down. This condition is bearish.
I must sound like a broken record. My philosophy is that the C Fund isn't the place to be when the market has stalled or is about to fall. We are nearing the edge this evening. Its that simple.
May you make wise investing choices!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Several points were noteworthy about today's action:
1. The market had its biggest selling day in two months.
2, Today counted as a "true selling" day. According to trader Gary Smith, it is wise to step away from the stock market when at least three major market indexes have dropped by more than 1%. Today, all of the major indexes were down by more than 1%. To quote Smith, "A 1 percent true selling day occurs after a period of rising prices of at least two weeks in which the Dow, S&P, Nasdaq 100, and Russell 2000 indexes all close down 1 percent or more on the same trading day. These types of days often are trend busters and can be harbingers of serious price declines ahead." How I Trade For a Living by Gary Smith, page 112.
3. There was a sharp drop in the Relative Strength Index (RSI). Remember how we closed yesterday at an unsustainable level of 70.89? Well, today the market had a "Come to Jesus" moment. The RSI closed in the 50s. This is a warning sign that all is not well with the market.
4. The flatlining MACD histogram has turned negative. For me, this point alone would be a "time to go" sign. But I'm very conservative when the market might be turning down.
5. The MACD line has turned down. This condition is bearish.
I must sound like a broken record. My philosophy is that the C Fund isn't the place to be when the market has stalled or is about to fall. We are nearing the edge this evening. Its that simple.
May you make wise investing choices!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Second Red Flag This Morning
In an earlier post, I wrote about a three red flag system. I consider the breach of the 13-day moving average when the market is rising to be a red flag. The red flag is comparable to the battery light coming on in your car. The red flag is a sign that something is amiss. Caution should be exercised. Three red flags and I'm just out of the C Fund until the storm passes.
This morning, we had a second red flag.
The market clipped the 13-day moving average on the clearstation.com chart. It is now time to get out if you're cautious. At least, it is time to be very cautious. Now, the second red flag doesn't mean the market will drop tomorrow. In fact, the market could rise. But the probabilities are strong that the next rise will be the final rise. Resistance lies @ the 1194ish level on the Standard & Poor's 500 Index.
When I was younger, I wouldn't care. I was a Bull for the long haul. I just invested 100% in the C Fund and forgot about the daily ups and downs. But I've learned that you can increase your performance by just taking the small step of stepping aside when storm clouds are approaching. And there's no point in being greedy and trying to squeeze the last point out of the market. There will always be opportunities to get back in at lower prices. Professional money managers operate this way.
Why shouldn't retail, average investors?
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
This morning, we had a second red flag.
The market clipped the 13-day moving average on the clearstation.com chart. It is now time to get out if you're cautious. At least, it is time to be very cautious. Now, the second red flag doesn't mean the market will drop tomorrow. In fact, the market could rise. But the probabilities are strong that the next rise will be the final rise. Resistance lies @ the 1194ish level on the Standard & Poor's 500 Index.
When I was younger, I wouldn't care. I was a Bull for the long haul. I just invested 100% in the C Fund and forgot about the daily ups and downs. But I've learned that you can increase your performance by just taking the small step of stepping aside when storm clouds are approaching. And there's no point in being greedy and trying to squeeze the last point out of the market. There will always be opportunities to get back in at lower prices. Professional money managers operate this way.
Why shouldn't retail, average investors?
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Monday, October 18, 2010
Approaching the Event Horizon - 1198
Mutual Fund Monday produced an up day.
No one can predict the market with certainty. But there are signs of a top that seem to be gathering force. The market is approaching important resistance at the 200-day moving average on a weekly chart. The market is drifting higher but the MACD histogram indicator is not. The stochastic seems to have been pointing down for the past several days. The RSI indicator is overbought again. A fall is approaching. I could guess Thursday, October 21, 2010 might be the start but that would an educated guess.
As I have written before, the market is like a roller coaster. Highs are followed by lows. Lows are followed by highs. And the cycle repeats itself over and over again. The market is due for a low. That's the road ahead, not the view out of the rear view mirror.
Let's see how this week unfolds. I wouldn't be surprised at all if the market prints, say, 1198 before dropping. The drop will be a correction and another buying opportunity. The idea is that it is better to buy into the C Fund at say 1065 rather than 1185. Call me crazy but that's my thinking.
Good evening!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
No one can predict the market with certainty. But there are signs of a top that seem to be gathering force. The market is approaching important resistance at the 200-day moving average on a weekly chart. The market is drifting higher but the MACD histogram indicator is not. The stochastic seems to have been pointing down for the past several days. The RSI indicator is overbought again. A fall is approaching. I could guess Thursday, October 21, 2010 might be the start but that would an educated guess.
As I have written before, the market is like a roller coaster. Highs are followed by lows. Lows are followed by highs. And the cycle repeats itself over and over again. The market is due for a low. That's the road ahead, not the view out of the rear view mirror.
Let's see how this week unfolds. I wouldn't be surprised at all if the market prints, say, 1198 before dropping. The drop will be a correction and another buying opportunity. The idea is that it is better to buy into the C Fund at say 1065 rather than 1185. Call me crazy but that's my thinking.
Good evening!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Sunday, October 17, 2010
Market Conditions Tonight
Tonight, I am 100% in the G Fund. Its a good feeling. The market is encountering more turbulence. The futures are down 6.90 points on the S&P 500 Index. Mondays are known as "Mutual Fund Monday." Markets experience a predictable inflow of new money from the retail public on Mondays. As a result, there tends to be a pattern of up days on Mondays. I would not be surprised if the market opened low and closed high.
What I'm really interested in is whether the market dips below the 13-day moving average. The 13-day moving average now sits @ 1159.72. If we see a dip below that level, then that dip will be red flag number 2. I would view it as a cautionary sign that its time to leave the C Fund for now.
The main teaching point this evening involves moving averages. Moving averages provide predictable levels of resistance, until they are broken convincingly to the upside. On the weekly chart, there is a sharp 200-day moving average line @ 1196. That line isn't going anywhere any time soon. Certainly, it's not going to be broken on the second attempt. (See George Angell, Winning in the Futures Market: A Money-Making Guide to Trading Hedging and Speculating, page 218 "Typically, if support or resistance is going to be broken, it will be penetrated on the third test of the low or the high.")
The odds favor the Bears for now. As I was walking through a bookstore yesterday, I saw a cover of MONEY magazine. The cover headline read "The Bullish Case for Stocks." I took this cover headline as further confirmation that storm clouds are coming.
Good luck with your investing!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
What I'm really interested in is whether the market dips below the 13-day moving average. The 13-day moving average now sits @ 1159.72. If we see a dip below that level, then that dip will be red flag number 2. I would view it as a cautionary sign that its time to leave the C Fund for now.
The main teaching point this evening involves moving averages. Moving averages provide predictable levels of resistance, until they are broken convincingly to the upside. On the weekly chart, there is a sharp 200-day moving average line @ 1196. That line isn't going anywhere any time soon. Certainly, it's not going to be broken on the second attempt. (See George Angell, Winning in the Futures Market: A Money-Making Guide to Trading Hedging and Speculating, page 218 "Typically, if support or resistance is going to be broken, it will be penetrated on the third test of the low or the high.")
The odds favor the Bears for now. As I was walking through a bookstore yesterday, I saw a cover of MONEY magazine. The cover headline read "The Bullish Case for Stocks." I took this cover headline as further confirmation that storm clouds are coming.
Good luck with your investing!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Friday, October 15, 2010
Fading the Media
Barbara often reminds me to keep it simple.
One simple principle to keep in mind is that the big money is made by fading or going against headline coverage of the market. By the time a story is picked up by the media, the market's advance is old news. More money can be made by doing the opposite of a headline story in the daily newspaper. For example, the local San Diego newspaper had several bleak stories about the market during the week of August 25. I remember those headlines and I thought to myself that this was a sign that the coast was clear. The storm had passed.
Two days ago, I read an essay on Market Oracle that was very bullish on the market. I slept on it and decided that it was a good time to move into the G Fund. I was being contrary.
Here is a reply that I submitted to the bullish essay posted by Mr. Banister, an active trader, two days ago:
"Dear Readers of the Market Oracle:
I read the articles on this site every day. Market Oracle is absolutely one of the best places around to get a sense of market sentiment.
In this positive spirit, I simply have to say that I became short-term bearish the instant I read Banister's essay. Traders and commentators as varied as R. Earl Hadady, Gary Smith and Nicholas Darvas have all warned that it is too late to be BULLISH when commentators turn BULLISH. The easy money has already been made. Now, if Banister had penned his essay on August 27, 2010, I would have listened and paid rapt attention. (And by the way, I turned BULLISH on August 25, 2010 and made my book for the year in my retirement account/smile. But I digress.)
Investing 101 teaches that media trumpeting of a BULL MARKET is inconsistent with a BULL MARKET. I respect Banister and consider him part of the media coverage of the market. I recall August 25. That morning, there was a newspaper cover story about how dreadful things were in the market. There seemed to be no rational reason to invest. I was afraid of the Hindenburg Omen and the Grand Cardinal Cross. LOL! (Try again, Mr. Crawford.)
I'm just saying that the good money is made by going opposite sentiment in market and media commentary. (See Contrary Opinion by R. Earl Hadady.) Banister's essay made me a BEAR for now. I went to 100% cash yesterday morning.
Thank you, Mr. Banister.
If I had the free time, I would draft a full-length essay because my feelings are strong on the matter of fading media sentiment. If anyone would like to engage me and make the BULL case, go to my blog http://thelasvegastspinvestmentclub.blogspot
Good investing to all!"
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
One simple principle to keep in mind is that the big money is made by fading or going against headline coverage of the market. By the time a story is picked up by the media, the market's advance is old news. More money can be made by doing the opposite of a headline story in the daily newspaper. For example, the local San Diego newspaper had several bleak stories about the market during the week of August 25. I remember those headlines and I thought to myself that this was a sign that the coast was clear. The storm had passed.
Two days ago, I read an essay on Market Oracle that was very bullish on the market. I slept on it and decided that it was a good time to move into the G Fund. I was being contrary.
Here is a reply that I submitted to the bullish essay posted by Mr. Banister, an active trader, two days ago:
"Dear Readers of the Market Oracle:
I read the articles on this site every day. Market Oracle is absolutely one of the best places around to get a sense of market sentiment.
In this positive spirit, I simply have to say that I became short-term bearish the instant I read Banister's essay. Traders and commentators as varied as R. Earl Hadady, Gary Smith and Nicholas Darvas have all warned that it is too late to be BULLISH when commentators turn BULLISH. The easy money has already been made. Now, if Banister had penned his essay on August 27, 2010, I would have listened and paid rapt attention. (And by the way, I turned BULLISH on August 25, 2010 and made my book for the year in my retirement account/smile. But I digress.)
Investing 101 teaches that media trumpeting of a BULL MARKET is inconsistent with a BULL MARKET. I respect Banister and consider him part of the media coverage of the market. I recall August 25. That morning, there was a newspaper cover story about how dreadful things were in the market. There seemed to be no rational reason to invest. I was afraid of the Hindenburg Omen and the Grand Cardinal Cross. LOL! (Try again, Mr. Crawford.)
I'm just saying that the good money is made by going opposite sentiment in market and media commentary. (See Contrary Opinion by R. Earl Hadady.) Banister's essay made me a BEAR for now. I went to 100% cash yesterday morning.
Thank you, Mr. Banister.
If I had the free time, I would draft a full-length essay because my feelings are strong on the matter of fading media sentiment. If anyone would like to engage me and make the BULL case, go to my blog http://thelasvegastspinvestmentclub.blogspot
Good investing to all!"
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
September 2008 - A Conversation with Barbara
Re: Why I'm 100% in Bonds (Part 2)Saturday, September 20, 2008 7:38 PM
From: This sender is DomainKeys verified"b@yahoo.com"View contact detailsTo: winkfieldtwyman@yahoo.comWe need to talk because this stuff is way over my head:) since I am home feel free to call me anytime at home or cell ...I need some one on one tutoring.
Sent from my BlackBerry® smartphone with SprintSpeed
--------------------------------------------------------------------------------
From: Winkfield Twyman
Date: Sat, 20 Sep 2008 16:48:17 -0700 (PDT)
To: Barbara
Subject: Why I'm 100% in Bonds (Part 2)
The economy moves in waves and cycles. Sometimes we are in times of prosperity. Sometimes we are in times of deprivation and depression. After studying the stock market every day (it's my hobby/smile) since about 1996, I think we have entered a long-term Bear Market of a long duration (15 years or so). Bankruptcies and foreclosures are rising. The federal government doesn't have $1.5 trillion to bail out all banks. The entire federal government budget comes to about $3 trillion. And I haven't mentioned the nightmare of derivatives that are leveraged investments in the neighborhood of $500 trillion! If the future looked bright, the stock market would keep going up with corrections. Instead, it seems to have peaked last August despite federal interventions.
If you have a long-term horizon and don't want to think about such things, then it's ok to remain invested and just wait out a 15-year Bear Market.
I've decided to step into a safe haven for now. If we're in a Bear Market where the market keeps making lower highs and lower lows, then bonds are a good thing to be in. Outside of the TSP system, I would suggest cash, gold, silver, shorts and puts. For example, PMPIX is an excellent gold fund. QID is an excellent fund for shorting high technology stocks.
Good luck.
(P.S. Schuyler invested in QID @ 41 back in June. QID is now 45, although it was up to 55 on Thursday.)
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
From: This sender is DomainKeys verified"b@yahoo.com"
Sent from my BlackBerry® smartphone with SprintSpeed
--------------------------------------------------------------------------------
From: Winkfield Twyman
Date: Sat, 20 Sep 2008 16:48:17 -0700 (PDT)
To: Barbara
Subject: Why I'm 100% in Bonds (Part 2)
The economy moves in waves and cycles. Sometimes we are in times of prosperity. Sometimes we are in times of deprivation and depression. After studying the stock market every day (it's my hobby/smile) since about 1996, I think we have entered a long-term Bear Market of a long duration (15 years or so). Bankruptcies and foreclosures are rising. The federal government doesn't have $1.5 trillion to bail out all banks. The entire federal government budget comes to about $3 trillion. And I haven't mentioned the nightmare of derivatives that are leveraged investments in the neighborhood of $500 trillion! If the future looked bright, the stock market would keep going up with corrections. Instead, it seems to have peaked last August despite federal interventions.
If you have a long-term horizon and don't want to think about such things, then it's ok to remain invested and just wait out a 15-year Bear Market.
I've decided to step into a safe haven for now. If we're in a Bear Market where the market keeps making lower highs and lower lows, then bonds are a good thing to be in. Outside of the TSP system, I would suggest cash, gold, silver, shorts and puts. For example, PMPIX is an excellent gold fund. QID is an excellent fund for shorting high technology stocks.
Good luck.
(P.S. Schuyler invested in QID @ 41 back in June. QID is now 45, although it was up to 55 on Thursday.)
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Thursday, October 14, 2010
The Flash Crash - My Conversation with Barbara
The Flash Crash in May of 2010 was a harrowing experience for most investors.
The following is my e-mail exchange with Barbara on that infamous day:
From: Wink
To: Barbara
Subject: Market Conditions
Sent: May 6, 2010 @ 11:29 a.m.
As you can see from the market's action today, the character of the market has changed. When 1150.45 was breached, things changed. Going forward, there will be times to buy like back in March, July, and November of 2009. But we have to wait for the dust to settle. And we have to realize that the gains may not be as spectacular as in 2009. Investors are really stressing the Greece debt crisis. Later.
Re: Market Conditions
From: Barbara
To: Wink
Sent: Thursday, May 6, 2010 @ 10:14 p.m.
Thank you!
Re: Market Conditions
From: Wink
To: Barbara
Sent: Friday, May 7, 2010 @ 7:36 a.m.
We may see further downward movement in the market next week. Now is not the time to more into the C Fund.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
The following is my e-mail exchange with Barbara on that infamous day:
From: Wink
To: Barbara
Subject: Market Conditions
Sent: May 6, 2010 @ 11:29 a.m.
As you can see from the market's action today, the character of the market has changed. When 1150.45 was breached, things changed. Going forward, there will be times to buy like back in March, July, and November of 2009. But we have to wait for the dust to settle. And we have to realize that the gains may not be as spectacular as in 2009. Investors are really stressing the Greece debt crisis. Later.
Re: Market Conditions
From: Barbara
To: Wink
Sent: Thursday, May 6, 2010 @ 10:14 p.m.
Thank you!
Re: Market Conditions
From: Wink
To: Barbara
Sent: Friday, May 7, 2010 @ 7:36 a.m.
We may see further downward movement in the market next week. Now is not the time to more into the C Fund.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
There Are Storm Clouds Approaching
At around 8:00 a.m. this morning, I moved 100% into the G Fund. The S&P 500 Index was at 1176.
The storm clouds are here. They are everywhere. A storm cloud is a formation on the market horizon. Normally, when the coast is clear, you don't see these formations. When they begin to cluster together, it is a sign that a storm will follow in market terms. When I see storm clouds ahead, I step aside.
Where are the storm clouds right now?
1. High Trin readings. Trin measures the amount of money going into or coming out of stocks. A high Trin reading means institutions are pulling money out of the market. A low Trin reading means money is pouring into stocks. I like high Trin readings at market bottoms. The storm is directly overhead and will pass away soon. So, that is a good time to buy stocks and to be in the C Fund.
When I see high Trin readings at the tail end of an advance in the market, that means the storm is approaching. It's a sign.
2. Candlesticks and Rice Traders. At this point, I lose Barbara and that's ok/smile. I won't go into detail but just know that when the market closes below its opening price, that storm cloud is Bearish. In other words, prices are going down at least for that day. A low close for the day (the closing price is lower than the opening price) means that selling pressure was greater than buying pressure throughout the day. We are talking about an Alpha Male Storm Cloud.
3. That RSI indicator took a hard dip down today. That is another storm cloud in my grab bag of concerns.
4.Expiration week is here. Tomorrow is expiration Friday. I will avoid the details but it is well known that the week following expiration week is vulnerable to market drops. That's another storm cloud.
5. My Own Psychology. Last night, I was feeling all warm and fuzzy about the market. Alot of other investors were as well. I read an essay at the website Market Oracle about how we were in the middle of a tremendous Bull Run. And then I came to my contrarian senses. When people start to write about how good things are, then it is a storm cloud. It is a signal that more money can be made going the opposite way.
6.Flatlining Blue Bars - MACD Histogram. This is another storm cloud. The market rise is false.
7. Triple Negative Divergence on Stochastics - Yet, another storm cloud.
Conclusion. One could be greedy and try to get the last point or two out of the market. But they say that pigs get slaughtered. I would rather take my profits and sleep well at night. There will always be another opportunity to move back into the C Fund at lower prices.
If anyone has any questions, please send them my way. It is easy to just invest for the long haul and forget it. But being passive is very risky. Why sit through downdrafts and drops in the market? Just a few simple tools like recognizing storm clouds can enhance your yearly returns and add to your retirement wealth.
Later.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
The storm clouds are here. They are everywhere. A storm cloud is a formation on the market horizon. Normally, when the coast is clear, you don't see these formations. When they begin to cluster together, it is a sign that a storm will follow in market terms. When I see storm clouds ahead, I step aside.
Where are the storm clouds right now?
1. High Trin readings. Trin measures the amount of money going into or coming out of stocks. A high Trin reading means institutions are pulling money out of the market. A low Trin reading means money is pouring into stocks. I like high Trin readings at market bottoms. The storm is directly overhead and will pass away soon. So, that is a good time to buy stocks and to be in the C Fund.
When I see high Trin readings at the tail end of an advance in the market, that means the storm is approaching. It's a sign.
2. Candlesticks and Rice Traders. At this point, I lose Barbara and that's ok/smile. I won't go into detail but just know that when the market closes below its opening price, that storm cloud is Bearish. In other words, prices are going down at least for that day. A low close for the day (the closing price is lower than the opening price) means that selling pressure was greater than buying pressure throughout the day. We are talking about an Alpha Male Storm Cloud.
3. That RSI indicator took a hard dip down today. That is another storm cloud in my grab bag of concerns.
4.Expiration week is here. Tomorrow is expiration Friday. I will avoid the details but it is well known that the week following expiration week is vulnerable to market drops. That's another storm cloud.
5. My Own Psychology. Last night, I was feeling all warm and fuzzy about the market. Alot of other investors were as well. I read an essay at the website Market Oracle about how we were in the middle of a tremendous Bull Run. And then I came to my contrarian senses. When people start to write about how good things are, then it is a storm cloud. It is a signal that more money can be made going the opposite way.
6.Flatlining Blue Bars - MACD Histogram. This is another storm cloud. The market rise is false.
7. Triple Negative Divergence on Stochastics - Yet, another storm cloud.
Conclusion. One could be greedy and try to get the last point or two out of the market. But they say that pigs get slaughtered. I would rather take my profits and sleep well at night. There will always be another opportunity to move back into the C Fund at lower prices.
If anyone has any questions, please send them my way. It is easy to just invest for the long haul and forget it. But being passive is very risky. Why sit through downdrafts and drops in the market? Just a few simple tools like recognizing storm clouds can enhance your yearly returns and add to your retirement wealth.
Later.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Move 100% into the G Fund
I have moved 100% into the G Fund. The G Fund is essentially a cash position. You can't lose money.
I did not like the high Trin readings this morning. Trin is a reading of how much money is leaving stocks as opposed to entering stocks. If we were close to a bottom, then I wouldn't stress it. However, we have had a long advance since August 27.
Time to book profits.
Later.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
I did not like the high Trin readings this morning. Trin is a reading of how much money is leaving stocks as opposed to entering stocks. If we were close to a bottom, then I wouldn't stress it. However, we have had a long advance since August 27.
Time to book profits.
Later.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Wednesday, October 13, 2010
Nightly Report - Market Conditions
The close today was interesting. The market actually dropped during the last 2 hours of the trading day. Even though I have a preconception that 1205 or 1196 will be resistance, I have to accept what the market is saying. What the market said today was that solid resistance is @ 1184. It is what it is.
Let's give it three days. If 1184 continues to stop the stock market in its tracks, then we should be prepared to move out of the C Fund and into the G Fund.
There are additional reasons for this caution tonight.
First, smart money was selling in the last two hours of the trading day today. Those sellers were not dumb money.
Second, the RSI indicator closed @ 70.29. That is an overbought condition.
Third, there is almost triple negative divergence between the stochastics and the price action on a yearly chart at clearstation.com. In other words, the price has been going up while the stochastics has been heading downward since September.
Fourth, the blue MACD histogram bars continue to flat line. This condition is further evidence of a negative divergence.
Finally, the 50-day moving average and the 200-day moving average are about to cross beneath the current S&P price. From what I have seen, the S&P price will be drawn towards this crossing of the two moving averages. It is an odd development but the cross acts like a magnet. This happened on July 1, the absolute bottom of the market for this year. The probabilities favor the S&P dropping down to the level of these two crossing moving averages.
Note that the 50-day moving average is currently at 1113.56. The 200-day moving average is currently at 1119.93.
Conclusion:
For these reasons,I am issuing an alert tonight. We should be prepared to move from the C Fund to the G Fund if resistance @1186 is not successfully broken within the next three days. The risks of a market down draft are very high.
Be careful out there!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Let's give it three days. If 1184 continues to stop the stock market in its tracks, then we should be prepared to move out of the C Fund and into the G Fund.
There are additional reasons for this caution tonight.
First, smart money was selling in the last two hours of the trading day today. Those sellers were not dumb money.
Second, the RSI indicator closed @ 70.29. That is an overbought condition.
Third, there is almost triple negative divergence between the stochastics and the price action on a yearly chart at clearstation.com. In other words, the price has been going up while the stochastics has been heading downward since September.
Fourth, the blue MACD histogram bars continue to flat line. This condition is further evidence of a negative divergence.
Finally, the 50-day moving average and the 200-day moving average are about to cross beneath the current S&P price. From what I have seen, the S&P price will be drawn towards this crossing of the two moving averages. It is an odd development but the cross acts like a magnet. This happened on July 1, the absolute bottom of the market for this year. The probabilities favor the S&P dropping down to the level of these two crossing moving averages.
Note that the 50-day moving average is currently at 1113.56. The 200-day moving average is currently at 1119.93.
Conclusion:
For these reasons,I am issuing an alert tonight. We should be prepared to move from the C Fund to the G Fund if resistance @1186 is not successfully broken within the next three days. The risks of a market down draft are very high.
Be careful out there!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Market Conditions - The Final Hour of the Trading Day
Conventional wisdom has it that the market has three time components: The first hour of the trading day, the middle of the day, the final hour of the trading day. The final hour (3:00 p.m. to 4:00 p.m. EST) tends to be dominated by professional money mangers and institutions. If they are buying, then it is a good rule of thumb that you should be buying (or at least be in the market already).
The time is 3:15 p.m.
The day was Bullish. The low (1171.32) was set early in the day. If the close is higher than the open (1171.32), then we know that smart money (institutions, pension funds, hedge funds, etc.) was buying. If the close is at support (1173), then that behavior just confirms that the trend is up. Even if the market closed @ 1155.20 (the 13-day moving average or green line @ stockcharts.com), that would just be a second red flag. I would still stay in the C Fund and continue to ride the trend up.
The market is clearly overbought. The RSI reading on the daily chart sits @ 70.69. The blue bars (MACD Histogram) continue to flat line. The Full Stochastics have been embedded in an overbought condition for a week. This means that the market is going straight up like a rocket launch. It is a good time to be 100% in the C Fund.
What Am I Watching?
Right now, I am watching the green line or 13-day moving average. It is up sloping so there are more gains to come. I am waiting for the line to be tagged a second time. That will be the second red flag. I am also waiting for the market to do its thing and hit 1196 and possibly 1205. It's all about the exit from the C Fund and transition to the G Fund.
If the Market does fall, how far might it fall?
Ira Epstein has written that, when markets fall out of an embedded overbought condition, they tend to fall down to the 50-day moving average. I saw that happen last year with the price of gold. And the fall is pretty dramatic when it occurs.
The 50-day moving average is at 1113.62, so that is a likely target for a market fall.
Cycle Low
A cycle low is projected for October 27. It is possible that the market could hit 1205 and then fall to the 50-day moving average by October 27. That would make sense time-wise but we have to let the market tell us what it wants to do.
The market is now @ 1181.81. We entered the market at the 1045-1065 level. So, it's all good for now. Our returns for the year are in the 16% range.
Have a Good Day!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
The time is 3:15 p.m.
The day was Bullish. The low (1171.32) was set early in the day. If the close is higher than the open (1171.32), then we know that smart money (institutions, pension funds, hedge funds, etc.) was buying. If the close is at support (1173), then that behavior just confirms that the trend is up. Even if the market closed @ 1155.20 (the 13-day moving average or green line @ stockcharts.com), that would just be a second red flag. I would still stay in the C Fund and continue to ride the trend up.
The market is clearly overbought. The RSI reading on the daily chart sits @ 70.69. The blue bars (MACD Histogram) continue to flat line. The Full Stochastics have been embedded in an overbought condition for a week. This means that the market is going straight up like a rocket launch. It is a good time to be 100% in the C Fund.
What Am I Watching?
Right now, I am watching the green line or 13-day moving average. It is up sloping so there are more gains to come. I am waiting for the line to be tagged a second time. That will be the second red flag. I am also waiting for the market to do its thing and hit 1196 and possibly 1205. It's all about the exit from the C Fund and transition to the G Fund.
If the Market does fall, how far might it fall?
Ira Epstein has written that, when markets fall out of an embedded overbought condition, they tend to fall down to the 50-day moving average. I saw that happen last year with the price of gold. And the fall is pretty dramatic when it occurs.
The 50-day moving average is at 1113.62, so that is a likely target for a market fall.
Cycle Low
A cycle low is projected for October 27. It is possible that the market could hit 1205 and then fall to the 50-day moving average by October 27. That would make sense time-wise but we have to let the market tell us what it wants to do.
The market is now @ 1181.81. We entered the market at the 1045-1065 level. So, it's all good for now. Our returns for the year are in the 16% range.
Have a Good Day!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
The Big Picture - A Daily Chart of the Market
I like the image of storm clouds on the horizon. The image reminds me that the market is always in a constant state of cycling. Lows are followed by highs. Highs are followed by lows. If the trend is up, then the lows are higher over time and the highs are higher. These conditions are good times to be invested in the C Fund (a proxy for a diversified portfolio of stocks).
In my previous post on the weekly market, I gave directions on how to use stockcharts.com to view the market. Repeat those instructions but, this time, leave the daily button (beside the blue update button) set on "daily."
The daily chart shows clear storm clouds on the horizon. These are the signs:
1. The RSI indicator at the very top of the chart is showing 70.37. This shows that the market is overbought. Remember that the market cycles from high to low and back again. We are now in high level territory. A high reading doesn't mean the market will drop tomorrow. It means that you should take note that prices are relatively high compared to past price action. In my experience, the time to sell happens when there is a "negative divergence" between the RSI reading and the price on the S&P. In other words, the S&P keeps going higher while the RSI reading goes lower. That is your sell signal! That is your signal to move 100% into the G Fund. We are not there yet.
2. The green line on the chart reflects the 13-day moving average of prices on the S&P 500 Index. Notice how the green line has provided support to prices since the second trading day in September. This is Bullish action. You want to see the 13-day moving average support rising prices. This means your C Fund will go up in value as well.
What about signs of storm clouds on the horizon?
3. Perhaps, the most unmistakable sign of storm clouds ahead would be the blue bars in the MACD chart. This chart is below the chart of the S&P 500 Index. Usually, the blue bars go up as the market goes up. Sometimes, the market keeps going up and the blue bars flatline. The blue bars die. This divergence is a sign that things are not right. Even though prices are rising, the price rise is false. It is false because it is not supported by rising blue bars or the MACD histogram.
Look at the blue bars carefully. See how they have flatlined since the beginning of October. To me, this flatlining means the rising market is living on borrowed time. So, I key in on resistance levels. Where are investors and traders likely to sell to try and get out even? As we know, those levels are probably around the open gap @ 1205. 1196 is another good possibility.
Conclusion.
We are enjoying the rise in prices for now. We are also aware that all good things come to an end at some point. We remain on the lookout for a third red flag. We are prepared to leave the C Fund if the market closes the gap @ 1205, or, simply hits the 200-day moving average @ 1196. As the famous trader Jesse Livermore suggested, we are being more fearful while the general public is becoming more greedy.
I use a pattern to ferret out turbulence ahead. Notice that on the second trading day in October, the market dipped below the 13-day moving average. I consider this to be red flag number 1. The market will probably keep going higher and that is cool. What I now do is look for a second red flag or instance where the market drops below the 13-day moving average. When this happens, I will consider the event to be red flag number 2. This means that we are approaching the event horizon. I would now be extra cautious. When the market dips below the 13-day moving average or green line for the third time, the market has flashed red flag number 3. Its time to go. Its time to step aside and see what develops next. If the three red flag system keeps me out of a rising market (February to April 2010), I don't stress because the market will eventually drop and I can simply get back into the C Fund at lower prices.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
In my previous post on the weekly market, I gave directions on how to use stockcharts.com to view the market. Repeat those instructions but, this time, leave the daily button (beside the blue update button) set on "daily."
The daily chart shows clear storm clouds on the horizon. These are the signs:
1. The RSI indicator at the very top of the chart is showing 70.37. This shows that the market is overbought. Remember that the market cycles from high to low and back again. We are now in high level territory. A high reading doesn't mean the market will drop tomorrow. It means that you should take note that prices are relatively high compared to past price action. In my experience, the time to sell happens when there is a "negative divergence" between the RSI reading and the price on the S&P. In other words, the S&P keeps going higher while the RSI reading goes lower. That is your sell signal! That is your signal to move 100% into the G Fund. We are not there yet.
2. The green line on the chart reflects the 13-day moving average of prices on the S&P 500 Index. Notice how the green line has provided support to prices since the second trading day in September. This is Bullish action. You want to see the 13-day moving average support rising prices. This means your C Fund will go up in value as well.
What about signs of storm clouds on the horizon?
3. Perhaps, the most unmistakable sign of storm clouds ahead would be the blue bars in the MACD chart. This chart is below the chart of the S&P 500 Index. Usually, the blue bars go up as the market goes up. Sometimes, the market keeps going up and the blue bars flatline. The blue bars die. This divergence is a sign that things are not right. Even though prices are rising, the price rise is false. It is false because it is not supported by rising blue bars or the MACD histogram.
Look at the blue bars carefully. See how they have flatlined since the beginning of October. To me, this flatlining means the rising market is living on borrowed time. So, I key in on resistance levels. Where are investors and traders likely to sell to try and get out even? As we know, those levels are probably around the open gap @ 1205. 1196 is another good possibility.
Conclusion.
We are enjoying the rise in prices for now. We are also aware that all good things come to an end at some point. We remain on the lookout for a third red flag. We are prepared to leave the C Fund if the market closes the gap @ 1205, or, simply hits the 200-day moving average @ 1196. As the famous trader Jesse Livermore suggested, we are being more fearful while the general public is becoming more greedy.
I use a pattern to ferret out turbulence ahead. Notice that on the second trading day in October, the market dipped below the 13-day moving average. I consider this to be red flag number 1. The market will probably keep going higher and that is cool. What I now do is look for a second red flag or instance where the market drops below the 13-day moving average. When this happens, I will consider the event to be red flag number 2. This means that we are approaching the event horizon. I would now be extra cautious. When the market dips below the 13-day moving average or green line for the third time, the market has flashed red flag number 3. Its time to go. Its time to step aside and see what develops next. If the three red flag system keeps me out of a rising market (February to April 2010), I don't stress because the market will eventually drop and I can simply get back into the C Fund at lower prices.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
The Big Picture - A Weekly Chart
After viewing a decade-long and five-year perspective on the market, the next step is to view a weekly chart. I use stockcharts.com, one of the best websites for following the market.
Stockcharts.com.
If you go to stockcharts.com, you will see the home page. On the left side is a thumb-sized chart of the various indicies. The heading above the chart reads "Today in the Market." Below this heading will be four choices: DJIA, NASDAQ, NYSE, S&P 500. Double click on S&P 500. You should see a nice chart of the market's peformance for the past 24 hours. As I type, the market is sitting on support @ 1173. I anticipate that the gap from yesterday's close will be filled. (In other words, the price will go to 1169 before heading back up.)
Now go to the right hand side of the homepage. You should see a column titled "Start to Chart!"
Under "Start to Chart," there is a choice called "Enter a symbol." Type in "$Spx" and hit the button "Go!" You should now see a daily chart for the Standard & Poor's 500 Index.
The Weekly Chart.
1. Directly above the chart you will see a blue button titled "Update." To the left of the Update button is a drop down tab that says "Daily." Click on the drop down tab and choose "Weekly."
2. Scroll down to the bottom of the page. You should see a group of drop down buttons under the heading "Overlays." The first row should say "Simple Moving Average 50". The second row should say "Simple Moving Average 200". You want the third row. Click on the drop down button and choose "Simple Moving Average." Then type in to the right "13."
3. Below Overlays is a final category of choices labeled "Indicators." RSI is in the first row. MACD is in the second row. Go the third row. Click on the drop down tab. Choose the choice "Full Stochastics."
4. Click on the bottom button that says "Update." Viola! You now have a professional quality weekly chart for the market.
Market Conditions On the Weekly Chart.
1. The market has been going up since August 27, 2010. The rise has been non-stop. These conditions are considered "Bullish" which just means the market is going up. Its that simple.
2. Notice the red line. The red line reflects the 200-day moving average of the market. Notice how the red line rejected prices back on April 26, 2010 @1219. The red line is resistance. Resistance just means there is more selling pressure at this level than buying pressure. When there are more sellers than buyers, then the price will go down.
3. We are approaching the red line. The red line is currently @ 1196.52. The red line continues to be resistance until proven otherwise.
4. The red line is sloping downward. This is a bearish sign. Bearish simply means that prices have a bias to the down side. Isn't it interesting that prices can be biased to the down side while prices have been going up for the last month? This is why wise traders say things are most risky and dangerous after a long advance.
5. Traders are not a patient lot. They will reverse positions in a heart beat when the trend changes.
6. There is an open gap @ 1205 from late April/early May. This is a natural target for the market to reach before retreating. I remember in November 2007 how the market dropped the first four days in November like a rock. Then it rebounded spectacularly in three days to close a gap. Once the gap was closed, the market dropped again and made a lower low. Larry Williams has written about this market behavior. There are investors who purchased the market back in April 2010 above 1205 who are eager to get out even.
Conclusion.
The weekly chart tells us that storm clouds are on the horizon. The horizon sits in a zone between 1196 and 1205. When the market reaches this level, it would be wise to move back into the G Fund. Then, we should watch how the market reacts to closing of the gap @ 1205.
Have a good day!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Stockcharts.com.
If you go to stockcharts.com, you will see the home page. On the left side is a thumb-sized chart of the various indicies. The heading above the chart reads "Today in the Market." Below this heading will be four choices: DJIA, NASDAQ, NYSE, S&P 500. Double click on S&P 500. You should see a nice chart of the market's peformance for the past 24 hours. As I type, the market is sitting on support @ 1173. I anticipate that the gap from yesterday's close will be filled. (In other words, the price will go to 1169 before heading back up.)
Now go to the right hand side of the homepage. You should see a column titled "Start to Chart!"
Under "Start to Chart," there is a choice called "Enter a symbol." Type in "$Spx" and hit the button "Go!" You should now see a daily chart for the Standard & Poor's 500 Index.
The Weekly Chart.
1. Directly above the chart you will see a blue button titled "Update." To the left of the Update button is a drop down tab that says "Daily." Click on the drop down tab and choose "Weekly."
2. Scroll down to the bottom of the page. You should see a group of drop down buttons under the heading "Overlays." The first row should say "Simple Moving Average 50". The second row should say "Simple Moving Average 200". You want the third row. Click on the drop down button and choose "Simple Moving Average." Then type in to the right "13."
3. Below Overlays is a final category of choices labeled "Indicators." RSI is in the first row. MACD is in the second row. Go the third row. Click on the drop down tab. Choose the choice "Full Stochastics."
4. Click on the bottom button that says "Update." Viola! You now have a professional quality weekly chart for the market.
Market Conditions On the Weekly Chart.
1. The market has been going up since August 27, 2010. The rise has been non-stop. These conditions are considered "Bullish" which just means the market is going up. Its that simple.
2. Notice the red line. The red line reflects the 200-day moving average of the market. Notice how the red line rejected prices back on April 26, 2010 @1219. The red line is resistance. Resistance just means there is more selling pressure at this level than buying pressure. When there are more sellers than buyers, then the price will go down.
3. We are approaching the red line. The red line is currently @ 1196.52. The red line continues to be resistance until proven otherwise.
4. The red line is sloping downward. This is a bearish sign. Bearish simply means that prices have a bias to the down side. Isn't it interesting that prices can be biased to the down side while prices have been going up for the last month? This is why wise traders say things are most risky and dangerous after a long advance.
5. Traders are not a patient lot. They will reverse positions in a heart beat when the trend changes.
6. There is an open gap @ 1205 from late April/early May. This is a natural target for the market to reach before retreating. I remember in November 2007 how the market dropped the first four days in November like a rock. Then it rebounded spectacularly in three days to close a gap. Once the gap was closed, the market dropped again and made a lower low. Larry Williams has written about this market behavior. There are investors who purchased the market back in April 2010 above 1205 who are eager to get out even.
Conclusion.
The weekly chart tells us that storm clouds are on the horizon. The horizon sits in a zone between 1196 and 1205. When the market reaches this level, it would be wise to move back into the G Fund. Then, we should watch how the market reacts to closing of the gap @ 1205.
Have a good day!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Tuesday, October 12, 2010
The Big Picture - A Five Year Chart of the Market
Yesterday, I talked about the big picture in terms of the decade.
Another big picture to consider is a five-year chart of the stock market. One of my favorite sources for a five-year snapshot of the market is clearstation.com. The site is wonderful in that it is user friendly, filled to the brim with charts and graphs, and contains ongoing commentary about market conditions. It is a treasure trove of knowledge. I may check clearstation.com 5 to 10 times a day.
Anyway, if you go to clearstation.com, you will immediately see their dashboard. At the upper left-hand corner in blue is the "Real Time Market Diary." Then you will see "DJ30," "NASDAQ," and "S&P 500." Double-click on "S&P 500." Great. You now have before you an invaluable road map for understanding market action. You will immediately see where the market has been, where the market is today, and, with a little experience and observation, where the market may be heading.
At the top of the chart above the red and green bars, you will see "Range" followed by various time increments. Double-click on "5yr." You should now see a five-year chart for the S&P 500. (And remember that the S&P 500 Index is the best proxy for a diversified portfolio of stocks and the C Fund.) The chart should cover the years 2006 through 2010. Notice how the market went up into October of 2007. The market fell into March of 2009. Then, the market rose to its close today @ 1169.77
I consider this chart even more valuable than a general roadmap for the decade. I am about to get a little technical but not too much. Just remember that the market has a psychology to it. It tends to move in waves because of the herd instinct. When investors are afraid, everyone runs for the exits. When investors are feeling warm and fuzzy (as they are right now), then investors become complacent.
The market moves in five waves, regardless of whether the market is moving up or down.
This is priceless information to know because it keeps you from being greedy right before the market is about to fall. And it will give you courage when the news is bleak and you are reluctant to move 100% into the C Fund. So, the market falls down (1), it rises (2), it falls down again alot (3), it rises alot (4), and falls for the final time (5). This is known as Elliott Wave theory but I want to keep things simple for now.
Look at that five-year chart very, very closely. What do you see?
I see a market that moved down from October 31, 2007 to March 16, 2008. (1) Then the market moved up into June/July of 2008. (2) At the time, I knew that another fall was ahead of us and that is what happened into March of 2009. (3) The market then rose to where we are today. (4) I am cautious about the immediate future because I am anticipating fall number (5). It may not happen. But if the fall does happen, it would likely begin to fall when the market reached its bottom level in March of 2008.
This five-year chart tells me that alot of investors are trapped. These investors were buying the dip in March of 2008 and they were proven wrong. At the least, I would anticipate that the market's advance would come to a halt at the March 2008 low. So, I would be prepared for storm clouds as the S&P 500 Index approached the March 2008 low. This magic point would be 1256 on the S&P 500 Index.
That would be a signal to move 100% into the G Fund until the storm clouds had passed.
In other words, the support level on the way down in March of 2008 has turned into resistance on the way up until proven otherwise.
Five-year charts are a good way to see what might lie up ahead.
As I used to tell Joel, investors lose out because they look into the rear view mirror. They believe the past is the future. Instead, the key is to see the road ahead. Past support on the way down will become future resistance on the way up.
-------------
Market Conditions for October 12, 2010 - Today, the market continued its advance. It was a typical Bullish day. Prices dropped in the early minutes of the trading day but then recovered to close higher than the day's open. This is Bullish. It is always Bullish when the day's high is higher than the day's open. Resistance @ 1172 was touched and then rejected. The next level of resistance is @ 1196. In a future post, I will explain why this level is probably a good level to move 100% back into the G Fund.
When the market goes down, there's no point in sticking around the C Fund.
Have a Good Evening!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Another big picture to consider is a five-year chart of the stock market. One of my favorite sources for a five-year snapshot of the market is clearstation.com. The site is wonderful in that it is user friendly, filled to the brim with charts and graphs, and contains ongoing commentary about market conditions. It is a treasure trove of knowledge. I may check clearstation.com 5 to 10 times a day.
Anyway, if you go to clearstation.com, you will immediately see their dashboard. At the upper left-hand corner in blue is the "Real Time Market Diary." Then you will see "DJ30," "NASDAQ," and "S&P 500." Double-click on "S&P 500." Great. You now have before you an invaluable road map for understanding market action. You will immediately see where the market has been, where the market is today, and, with a little experience and observation, where the market may be heading.
At the top of the chart above the red and green bars, you will see "Range" followed by various time increments. Double-click on "5yr." You should now see a five-year chart for the S&P 500. (And remember that the S&P 500 Index is the best proxy for a diversified portfolio of stocks and the C Fund.) The chart should cover the years 2006 through 2010. Notice how the market went up into October of 2007. The market fell into March of 2009. Then, the market rose to its close today @ 1169.77
I consider this chart even more valuable than a general roadmap for the decade. I am about to get a little technical but not too much. Just remember that the market has a psychology to it. It tends to move in waves because of the herd instinct. When investors are afraid, everyone runs for the exits. When investors are feeling warm and fuzzy (as they are right now), then investors become complacent.
The market moves in five waves, regardless of whether the market is moving up or down.
This is priceless information to know because it keeps you from being greedy right before the market is about to fall. And it will give you courage when the news is bleak and you are reluctant to move 100% into the C Fund. So, the market falls down (1), it rises (2), it falls down again alot (3), it rises alot (4), and falls for the final time (5). This is known as Elliott Wave theory but I want to keep things simple for now.
Look at that five-year chart very, very closely. What do you see?
I see a market that moved down from October 31, 2007 to March 16, 2008. (1) Then the market moved up into June/July of 2008. (2) At the time, I knew that another fall was ahead of us and that is what happened into March of 2009. (3) The market then rose to where we are today. (4) I am cautious about the immediate future because I am anticipating fall number (5). It may not happen. But if the fall does happen, it would likely begin to fall when the market reached its bottom level in March of 2008.
This five-year chart tells me that alot of investors are trapped. These investors were buying the dip in March of 2008 and they were proven wrong. At the least, I would anticipate that the market's advance would come to a halt at the March 2008 low. So, I would be prepared for storm clouds as the S&P 500 Index approached the March 2008 low. This magic point would be 1256 on the S&P 500 Index.
That would be a signal to move 100% into the G Fund until the storm clouds had passed.
In other words, the support level on the way down in March of 2008 has turned into resistance on the way up until proven otherwise.
Five-year charts are a good way to see what might lie up ahead.
As I used to tell Joel, investors lose out because they look into the rear view mirror. They believe the past is the future. Instead, the key is to see the road ahead. Past support on the way down will become future resistance on the way up.
-------------
Market Conditions for October 12, 2010 - Today, the market continued its advance. It was a typical Bullish day. Prices dropped in the early minutes of the trading day but then recovered to close higher than the day's open. This is Bullish. It is always Bullish when the day's high is higher than the day's open. Resistance @ 1172 was touched and then rejected. The next level of resistance is @ 1196. In a future post, I will explain why this level is probably a good level to move 100% back into the G Fund.
When the market goes down, there's no point in sticking around the C Fund.
Have a Good Evening!
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Overview of the Thrift Savings Plan (TSP)
TSP
The Thrift Savings Plan or TSP is a "defined contribution plan" for federal employees, both current employees and those that are retired. When you think of the TSP, think of a 401(k) but for federal government workers. The Federal Retirement Thrift Investment Board runs the TSP.
How Does TSP Work?
Federal employees are eligible immediately to start contributing to the plan. Some wisely do so. Others may have other obligations like credit cards bills and student loan payments. Nonetheless, it is wise to begin contributing as soon as possible.
Usually there is an office manager or benefits administrator that will make the arrangements for you. Once you have filled out the paperwork and are signed up, the contributions are automatically deducted from your paycheck. I recommend that you contribute at least 10% of your salary, if at all possible. Those dollars start to add over time. I think I had six figures in my TSP account within a decade. That's not bad. Plus the contributions are tax-free and the federal government provides a matching contribution.
Core Principles
There are three core principles we follow in this club.
Number 1, try to contribute as soon as you can and as much as you can. Savings is the true path to long-term prosperity.
Number 2, allocate 100% of your contributions to the G Fund when the market is dropping. Why? You cannot lose money in the G Fund. It is the safest place to be in a market crash. Even if you are only making 3% or 5% on your money, that is far better than losing 7% or 17% of your retirement funds in one month! Be ultra-safe when the storm clouds are overhead (Barbara knows/smile).
Number 3, when the market is going up, then you allocate 100% of your contributions to the C Fund. The C Fund is a rough proxy for a broad portfolio of stock holdings. Do not be shy when the market is going up! That is your opportunity to make money! The club profited from the best September in 79 years because we had maximum exposure to stocks on August 25, 2010.
Similar State, City, or County Investment Plans
Most governmental entities have investment plans comparable to the TSP. The same investment principles apply. Contribute as early and as often as you can. 10% of your gross salary is a solid goal. There is a season to take risk and there is a season to be safe. Act accordingly. Diversification will slow your rate of wealth appreciation. Put all of your eggs in the safest basket possible when the market is dropping. Put all of your eggs in the strongest growth stocks when the market is going up.
The ABCs of Investing
Each decade provides you with a road map for investment success. We are in the year 2010. History reaches us that between now and October 2012, we should anticipate that the market will be bottoming. But there will be times when the market does rise. How do you know when to be in the G Fund and when to be in the C Fund?
1. Buy When Prices are Low - There are ways to tell when the market is at a low point. You always want to buy low because prices will rise over time. This blog will discuss the ways to know when the market is low.
2. Sell When Prices are High - When prices are bumping up against a high level, then you sell your C Fund holdings and move into the G Fund. Why? Because high prices are followed by low prices. Think of the market as a roller coaster, up and down and up and down. Once you have that idea in your mind, you will not get greedy and expect prices to keep going higher forever. They don't.
3. Buy in October, Go Away in May -
There is an old Wall Street adage that you should basically forget about the market during the summer. The real money is made in the Fall and Winter. I have seen this happen enough times to know that the seasons do matter. Always consider the time of the year before moving into the C Fund. Here's a hint--The best times to go into the C Fund are usually August and October.
Conclusion.
I hope Barbara doesn't mind that I kept referring to her. She is, however, a great example of someone who is learning and getting up to speed over time. Her insights are terrific. And I thank her for the idea of this post.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
The Thrift Savings Plan or TSP is a "defined contribution plan" for federal employees, both current employees and those that are retired. When you think of the TSP, think of a 401(k) but for federal government workers. The Federal Retirement Thrift Investment Board runs the TSP.
How Does TSP Work?
Federal employees are eligible immediately to start contributing to the plan. Some wisely do so. Others may have other obligations like credit cards bills and student loan payments. Nonetheless, it is wise to begin contributing as soon as possible.
Usually there is an office manager or benefits administrator that will make the arrangements for you. Once you have filled out the paperwork and are signed up, the contributions are automatically deducted from your paycheck. I recommend that you contribute at least 10% of your salary, if at all possible. Those dollars start to add over time. I think I had six figures in my TSP account within a decade. That's not bad. Plus the contributions are tax-free and the federal government provides a matching contribution.
Core Principles
There are three core principles we follow in this club.
Number 1, try to contribute as soon as you can and as much as you can. Savings is the true path to long-term prosperity.
Number 2, allocate 100% of your contributions to the G Fund when the market is dropping. Why? You cannot lose money in the G Fund. It is the safest place to be in a market crash. Even if you are only making 3% or 5% on your money, that is far better than losing 7% or 17% of your retirement funds in one month! Be ultra-safe when the storm clouds are overhead (Barbara knows/smile).
Number 3, when the market is going up, then you allocate 100% of your contributions to the C Fund. The C Fund is a rough proxy for a broad portfolio of stock holdings. Do not be shy when the market is going up! That is your opportunity to make money! The club profited from the best September in 79 years because we had maximum exposure to stocks on August 25, 2010.
Similar State, City, or County Investment Plans
Most governmental entities have investment plans comparable to the TSP. The same investment principles apply. Contribute as early and as often as you can. 10% of your gross salary is a solid goal. There is a season to take risk and there is a season to be safe. Act accordingly. Diversification will slow your rate of wealth appreciation. Put all of your eggs in the safest basket possible when the market is dropping. Put all of your eggs in the strongest growth stocks when the market is going up.
The ABCs of Investing
Each decade provides you with a road map for investment success. We are in the year 2010. History reaches us that between now and October 2012, we should anticipate that the market will be bottoming. But there will be times when the market does rise. How do you know when to be in the G Fund and when to be in the C Fund?
1. Buy When Prices are Low - There are ways to tell when the market is at a low point. You always want to buy low because prices will rise over time. This blog will discuss the ways to know when the market is low.
2. Sell When Prices are High - When prices are bumping up against a high level, then you sell your C Fund holdings and move into the G Fund. Why? Because high prices are followed by low prices. Think of the market as a roller coaster, up and down and up and down. Once you have that idea in your mind, you will not get greedy and expect prices to keep going higher forever. They don't.
3. Buy in October, Go Away in May -
There is an old Wall Street adage that you should basically forget about the market during the summer. The real money is made in the Fall and Winter. I have seen this happen enough times to know that the seasons do matter. Always consider the time of the year before moving into the C Fund. Here's a hint--The best times to go into the C Fund are usually August and October.
Conclusion.
I hope Barbara doesn't mind that I kept referring to her. She is, however, a great example of someone who is learning and getting up to speed over time. Her insights are terrific. And I thank her for the idea of this post.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Monday, October 11, 2010
The Big Picture for Investing
There is nothing new under the Sun.
The great trader, Jesse Livermore, wrote that the market would never change because human nature never changes. We are always moved by fear and greed. We are greedy when we should be fearful. And we are fearful when we should be greedy. That's life. That's the marketplace.
A long-forgotten market forecaster, Edson Gould, studied the stock market from 1881 to 1960. Gould discovered that the market followed a predictable pattern every decade. The early years were years of a bottoming process. The middle years of the decade were times of rip-roaring Bull Markets. The final three years of a decade were most likely to be filled with panics and crashes. That's the road map. That's the Big Picture. It's that simple (I'm listening to you, Barbara/smile).
I remember boring Joel about the market one evening. We were having dinner at the Main Street Station Casino All-You-Can-Eat-Buffet. The year must have been 2003 or 2004. Anyway, I had just read Larry Williams' book, The Right Stock at the Right Time: Prospering in the Coming Good Years (2003) . When I discovered the seasonal cycles and the ten year decade pattern in his book, I felt like I had discovered the keys to the kingdom. I excitedly told Joel that the market would have a panic around the year 2007/2008. He listened politely but 2007 was 3 or 4 years in the future. Why would Joel care to know that the market might crash towards the end of the decade? Well, I cared and I was on alert for a panic throughout most of the decade.
I could bore you guys for hours with technicalities and details. But what matters to you as long-term investors is the big picture. And I can tell you tonight that the big picture is bright, although there will be ups and downs along the way. We will see a significant bottom in October 2012, so I will be on guard for a nice bottom and buy opportunity around that time period. 2015 should be a crazy time of good returns. And, since there is nothing new under the Sun, we should be prepared for the obligatory panic and crash around 2017 to 2019. 2022 (either August or October) should be the buy opportunity of a generation.
That's the Big Picture, guys. That's the big picture ahead of us. It's that simple.
Later,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
The great trader, Jesse Livermore, wrote that the market would never change because human nature never changes. We are always moved by fear and greed. We are greedy when we should be fearful. And we are fearful when we should be greedy. That's life. That's the marketplace.
A long-forgotten market forecaster, Edson Gould, studied the stock market from 1881 to 1960. Gould discovered that the market followed a predictable pattern every decade. The early years were years of a bottoming process. The middle years of the decade were times of rip-roaring Bull Markets. The final three years of a decade were most likely to be filled with panics and crashes. That's the road map. That's the Big Picture. It's that simple (I'm listening to you, Barbara/smile).
I remember boring Joel about the market one evening. We were having dinner at the Main Street Station Casino All-You-Can-Eat-Buffet. The year must have been 2003 or 2004. Anyway, I had just read Larry Williams' book, The Right Stock at the Right Time: Prospering in the Coming Good Years (2003) . When I discovered the seasonal cycles and the ten year decade pattern in his book, I felt like I had discovered the keys to the kingdom. I excitedly told Joel that the market would have a panic around the year 2007/2008. He listened politely but 2007 was 3 or 4 years in the future. Why would Joel care to know that the market might crash towards the end of the decade? Well, I cared and I was on alert for a panic throughout most of the decade.
I could bore you guys for hours with technicalities and details. But what matters to you as long-term investors is the big picture. And I can tell you tonight that the big picture is bright, although there will be ups and downs along the way. We will see a significant bottom in October 2012, so I will be on guard for a nice bottom and buy opportunity around that time period. 2015 should be a crazy time of good returns. And, since there is nothing new under the Sun, we should be prepared for the obligatory panic and crash around 2017 to 2019. 2022 (either August or October) should be the buy opportunity of a generation.
That's the Big Picture, guys. That's the big picture ahead of us. It's that simple.
Later,
Wink
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
Opportunity is a Powerful Force
Welcome to The TSP Investment Club!
We are up 14% for the year 2010 in the C Fund and G Fund combined. (As of the market close, December 31, 2010)
The Standard & Poor's 500 Index is up roughly 12.8% for the year 2010. (As of the market close, December 31, 2010)
[July 3, 2011 Update: We are flat for the year. The market is severely overbought in a downtrend. We anticipate resumption of the dominant down trend this month and performance surpassing the Standard & Poor's 500 Index by August 31, 2011.]
Over the years, I would urge Barbara to invest in the Thrift Savings Plan. I remember those early years well when stocks like Yahoo and Juniper Networks seemingly were going up to the moon. Then, the market crashed in 2000. I remained bullish , however, because I knew that historically, the market has gone up more than it has gone down. I made mistakes along the way but I remained persistent in trying to understand why the market would go up and why it would go down. I read many, many books. In doing so, I discovered that no one had the answer all the time to the market. But there were ways of thinking about the market that offered more value than others; i.e. the Elliott Wave theory, positive and negative divergence, the 40-week cycle (I can see Barbara in my mind's eye reminding me to keep it simple/smile.)
Well, to keep it simple, I began to anticipate times when the market might fall. And I was right. I began to anticipate times when the market might rise. And I was right. But I didn't touch my retirement account because I was long-term bullish.
Things changed in 2008. For technical reasons, I could foresee in the Summer of 2008 that the market was about to crash. I suggested to Barbara that she move out of the C Fund and into the G Fund until the storm had passed. I did. Barbara didn't because she was very busy with life. Well, the crash came and both of us were impressed with the ability of technical analysis to foresee a stock market crash.
In March 2009, I suggested to Barbara that she move 100% of her funds into the C Fund. March 2009 would be the absolute bottom for the year. This year, I suggested that Barbara stay out of the C Fund in early May, moments before the famous Flash Crash. When the storm had passed, I suggested to Barbara and other core members of The TSP Investment Club that I was going 100% into the C Fund. The date was August 25, 2010.
We are now up over 10% for the year as of October 11, 2011.
The purpose of this blog is to help educate the public about investing. Why are some times better for the C Fund than other times? How do you know when the market is about to have the best September in 79 years? How do you sense that the market is about to fall over a cliff? How can we keep it all as simple as possible? (I hear you, Barbara).
So, that's what we are about.
My goal is that we are 100% in the C Fund when the market is going up. And that we are 100% in the G Fund when the market is going down. I hope that we continue to beat most professional money managers year after year after year. I also hope that we add to the education level of the average investor.
Opportunity is a powerful force! May we always be ready to seize opportunities like August 25, 2010 and March 2009 in the future days to come.
Sincerely,
Wink
Barbara
John
Jenny
Cheryl
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
We are up 14% for the year 2010 in the C Fund and G Fund combined. (As of the market close, December 31, 2010)
The Standard & Poor's 500 Index is up roughly 12.8% for the year 2010. (As of the market close, December 31, 2010)
[July 3, 2011 Update: We are flat for the year. The market is severely overbought in a downtrend. We anticipate resumption of the dominant down trend this month and performance surpassing the Standard & Poor's 500 Index by August 31, 2011.]
Over the years, I would urge Barbara to invest in the Thrift Savings Plan. I remember those early years well when stocks like Yahoo and Juniper Networks seemingly were going up to the moon. Then, the market crashed in 2000. I remained bullish , however, because I knew that historically, the market has gone up more than it has gone down. I made mistakes along the way but I remained persistent in trying to understand why the market would go up and why it would go down. I read many, many books. In doing so, I discovered that no one had the answer all the time to the market. But there were ways of thinking about the market that offered more value than others; i.e. the Elliott Wave theory, positive and negative divergence, the 40-week cycle (I can see Barbara in my mind's eye reminding me to keep it simple/smile.)
Well, to keep it simple, I began to anticipate times when the market might fall. And I was right. I began to anticipate times when the market might rise. And I was right. But I didn't touch my retirement account because I was long-term bullish.
Things changed in 2008. For technical reasons, I could foresee in the Summer of 2008 that the market was about to crash. I suggested to Barbara that she move out of the C Fund and into the G Fund until the storm had passed. I did. Barbara didn't because she was very busy with life. Well, the crash came and both of us were impressed with the ability of technical analysis to foresee a stock market crash.
In March 2009, I suggested to Barbara that she move 100% of her funds into the C Fund. March 2009 would be the absolute bottom for the year. This year, I suggested that Barbara stay out of the C Fund in early May, moments before the famous Flash Crash. When the storm had passed, I suggested to Barbara and other core members of The TSP Investment Club that I was going 100% into the C Fund. The date was August 25, 2010.
We are now up over 10% for the year as of October 11, 2011.
The purpose of this blog is to help educate the public about investing. Why are some times better for the C Fund than other times? How do you know when the market is about to have the best September in 79 years? How do you sense that the market is about to fall over a cliff? How can we keep it all as simple as possible? (I hear you, Barbara).
So, that's what we are about.
My goal is that we are 100% in the C Fund when the market is going up. And that we are 100% in the G Fund when the market is going down. I hope that we continue to beat most professional money managers year after year after year. I also hope that we add to the education level of the average investor.
Opportunity is a powerful force! May we always be ready to seize opportunities like August 25, 2010 and March 2009 in the future days to come.
Sincerely,
Wink
Barbara
John
Jenny
Cheryl
Standard Disclaimers
1. This blog is for educational purposes only.
2. None of the individuals associated with the Las Vegas TSP Investment Club are registered financial advisors.
3. This blog is not an offer to the public to buy or sell any stocks, options, commodities or futures.
4. You are encouraged to do your own due diligence and to consult with a professional financial advisor before making any investment decision.
5. This blog cannot take responsibility for the results of your investment and trading decisions.
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