Today was an interesting day. The S&P 500 Index closed @ 1284.94.
We saw timid buying pressure on the S&P 500 Index throughout most of the day. Then, at 2:00 p.m.(Eastern Standard Time), selling pressure kicked in. By the close of the day, prices were at the low of the day. This price action is very bearish because smart money (big institutions, pensions, hedge funds, etc.) tend to make their move at the end of the day. So, we can infer that Big Money was selling, not buying today.
The drop between 2:15 p.m. and 4:00 p.m was quite dramatic.
On a daily chart, several features caught my eye. First, the Relative Strength Index (RSI) is approaching an oversold condition on the daily chart. Second, the 13-day moving average has crossed the 50-day moving average. Many investors and traders will take this cross-over as a cue to either stay out of the market or to stay short. Third, today's drop within the last two hours of the trading day suggest lower prices are ahead. Fourth, the MACD lines clearly show that the trend remains down. There is no doubt whatsoever. This suggests 1284 will not hold for long as support in the market. Finally, today was the second day where both the red and black stochastic lines were below 20. If both lines remain below 20 or the oversold level at tomorrow's close, some traders would take this as a signal that the stochastics are embedded and a dramatic drop lies ahead.
Since I am out of the C Fund, it is easiest to stomach a market drop/smile.
If we pull back one level and look at a weekly chart for the S&P 500 Index, we can see several obvious support and resistance levels. Support lies at 1226.82 (50-day moving average) and 1165.71 (200-day moving average). Resistance lies at 1323.21.
What insights do these levels provide for investors and traders?
Consider the following notes:
1. Since we are in a down trend, one should look to sell on a market bounce. 1323 would be an ideal selling level. Markets don't have to bounce but they usually do in a down trend.
2. Since we are in a down trend,we should expect the market to bounce at a support level. The next support level is 1226.82 (50-day moving average). I would look for a bounce when the market reaches 1226 or so.
3. If there is no noticeable bounce at 1226, the last bounce of importance should be at 1167 or so. That would be the last opportunity in all probability to profit from a good rally.
Conclusion--My advice to enjoy the summer remains. If, by chance, these resistance or support levels should be hit, then one should act accordingly. I am more bearish right now than bullish for the reasons discussed earlier.
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, June 7, 2011
Protection in Foreign Currencies
The big financial event on the horizon is August 2. August 2 is the projected date for the technical default of the U.S. Government, unless the debt ceiling is raised. I assume that the forces in Congress will bite the bullet and raise the debt ceiling. At least, I hope so.
In a worse case scenario, a congressional refusal to raise the debt ceiling would not be well received by the markets. There would be an appreciable hit on the value of the U.S. Dollar. From what I gather, one means of protection against such an event would be investment in the Swiss Franc (FXF) and the Australian Dollar (FXA) through exchange traded funds. These are exchange traded funds that allow the average investor to have exposure to foreign currencies. Both of these funds show strong up trends, the Swiss Franc more so than the Australian Dollar.
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.
In a worse case scenario, a congressional refusal to raise the debt ceiling would not be well received by the markets. There would be an appreciable hit on the value of the U.S. Dollar. From what I gather, one means of protection against such an event would be investment in the Swiss Franc (FXF) and the Australian Dollar (FXA) through exchange traded funds. These are exchange traded funds that allow the average investor to have exposure to foreign currencies. Both of these funds show strong up trends, the Swiss Franc more so than the Australian Dollar.
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.
Monday, June 6, 2011
The Trend Is Your Friend
One of the handy tools for investing is the rule--"The Trend is Your Friend." The easiest time is make money is when the market is trending up. Dips and corrections are buying opportunities because higher prices are ahead. The same rule works in reverse as well. When the market is trending down, then it really is a good time to enjoy the summer and to go fishing. The market will not reverse course , no matter how much you might hope and pray. It's going to go down until selling pressure is exhausted. This was the condition last year between April 26, 2010 and July 1, 2010. There really wasn't much going on in the market, except for lower prices over time.
From what I can tell, the up trend since March 9, 2009 was broken today on a weekly chart. When up trends are broken, they tend to fall to some lower level of support. The up trend began at March 9, 2009, dropped again on August 27, 2010, and now seems to have dropped below this weekly trend line for the first time. I'm not feeling particularly bullish right now. There are so many fundamental reasons for prices to fall further--the end of Quantitative Easing on June 30, the debt crisis in Greece, the uncertainty surrounding an increase in the federal debt ceiling, the falling real estate market, the poor jobs report last week, budget problems at the state and local levels, the maturity wall federal debt will hit in 2012, etc. You get the picture.
Anyway, these are good times to just sit back and watch the market do its thing.
Today, the S&P 500 Index closed @ 1286.
I left the C Fund @ 1300.
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 what I can tell, the up trend since March 9, 2009 was broken today on a weekly chart. When up trends are broken, they tend to fall to some lower level of support. The up trend began at March 9, 2009, dropped again on August 27, 2010, and now seems to have dropped below this weekly trend line for the first time. I'm not feeling particularly bullish right now. There are so many fundamental reasons for prices to fall further--the end of Quantitative Easing on June 30, the debt crisis in Greece, the uncertainty surrounding an increase in the federal debt ceiling, the falling real estate market, the poor jobs report last week, budget problems at the state and local levels, the maturity wall federal debt will hit in 2012, etc. You get the picture.
Anyway, these are good times to just sit back and watch the market do its thing.
Today, the S&P 500 Index closed @ 1286.
I left the C Fund @ 1300.
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.
When To Sell
For now, the market is in a down trend. You can tell for several reasons. First, the MACD lines are open and pointing down on a daily and week chart. Second, there is severe negative triple divergence between the price action of the S&P 500 Index and the stochastic on a weekly chart. Third, the market is reacting poorly to bad news. In an up trend, the market ignores bad news.
I chose to leave the C Fund @ 1300 on Friday, June 3.
Q: Could the market bounce? Yes, it could and probably will. However, any bounce and rally should be sold in the short-term.
If the market should bounce and reach the 1320 level, that would be another good opportunity to leave the C Fund.
Why the 1320 level? 1320 reflects support turned into resistance on a weekly chart. The 13-day moving average on a weekly chart stands @ 1324. There are no guarantees in this business. It is possible that the market might not bounce.
Enjoy the Summer! There are other things to do besides the market. There won't be much going on in the market for a while.
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 chose to leave the C Fund @ 1300 on Friday, June 3.
Q: Could the market bounce? Yes, it could and probably will. However, any bounce and rally should be sold in the short-term.
If the market should bounce and reach the 1320 level, that would be another good opportunity to leave the C Fund.
Why the 1320 level? 1320 reflects support turned into resistance on a weekly chart. The 13-day moving average on a weekly chart stands @ 1324. There are no guarantees in this business. It is possible that the market might not bounce.
Enjoy the Summer! There are other things to do besides the market. There won't be much going on in the market for a while.
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, June 5, 2011
Observations on the Housing Market
The Zero Hedge Blog posted these recent observations on the housing market:
"Prices have now fallen by more than they did during the Great Depression."
"By their calculations (Wall Street Journal citing Capital Economics), prices are now down 33% from their 2006 peak, compared with the 31% decline during the Depression."
"In the greatest financial crash of all time--the crash of the 1340s in Italy...real estate prices fell by 50 percent by 1349 in Florence when boom became bust."
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.
"Prices have now fallen by more than they did during the Great Depression."
"By their calculations (Wall Street Journal citing Capital Economics), prices are now down 33% from their 2006 peak, compared with the 31% decline during the Depression."
"In the greatest financial crash of all time--the crash of the 1340s in Italy...real estate prices fell by 50 percent by 1349 in Florence when boom became bust."
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, June 4, 2011
Out of the C Fund @1300, Into the G Fund
Since May 1, 2011, the market has been drifting downwards. The character of the market has changed. Since August 2007, buying the market at the bottom of the 10/20/40 week cycle has worked like clockwork. It produced a wonderful buy opportunity in August 2007, March 2009, October 2009, and August 2010. This time, the cycle time frame did not provide a solid level of support. This means the market has changed in a fundamental way. When the character of the market has changed, it is best to stand aside.
In addition, the market dropped in a five-wave move since May 1. The market has not dropped in a five-wave fashion since July 1, 2010. This is another sign that the market has changed from an up trend to a down trend.
Moreover, there is a triple negative divergence between the price action of the S&P 500 Index and the MACD line since the November highs. This is another sign that it is time to go for now.
Stepping back and looking at the big picture, the future does not appear bright. Congress continues to hem and haw on raising the debt ceiling. If the debt ceiling is not raised by August, the U.S. Government will run out of the money and the market will drop. In addition, an analyst that I follow believes that the end of quantitative easing this month will mean the resumption of the Bear Market from 2008. I am also leery about the long-term impact and effects of the Japanese earthquake, not to mention the debt situation in Europe.
Finally, I am a believer in the force of demographics. Many baby boomers will be retiring this decade. They will be cashing out pensions and 401(k) plans. This cashing out will place additional pressure on the markets.I could easily see a long-term market drop into 2016 based on the aging of the baby boomers alone.
When in doubt, get out. It is time to step aside for a moment.
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 addition, the market dropped in a five-wave move since May 1. The market has not dropped in a five-wave fashion since July 1, 2010. This is another sign that the market has changed from an up trend to a down trend.
Moreover, there is a triple negative divergence between the price action of the S&P 500 Index and the MACD line since the November highs. This is another sign that it is time to go for now.
Stepping back and looking at the big picture, the future does not appear bright. Congress continues to hem and haw on raising the debt ceiling. If the debt ceiling is not raised by August, the U.S. Government will run out of the money and the market will drop. In addition, an analyst that I follow believes that the end of quantitative easing this month will mean the resumption of the Bear Market from 2008. I am also leery about the long-term impact and effects of the Japanese earthquake, not to mention the debt situation in Europe.
Finally, I am a believer in the force of demographics. Many baby boomers will be retiring this decade. They will be cashing out pensions and 401(k) plans. This cashing out will place additional pressure on the markets.I could easily see a long-term market drop into 2016 based on the aging of the baby boomers alone.
When in doubt, get out. It is time to step aside for a moment.
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, June 3, 2011
100% into the G Fund
I am 100% in the G Fund. Since May 1, 2011, the market has moved in one direction. That direction has been down. I don't see the direction changing anytime soon. Plus, the economy still hasn't felt the full impact of the earthquake in Japan.
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.
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