Market Confirms Move to Cash

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We're on the fence post, but are leaning to move to cash if you are conservative.  IBD confirmed last night that we are "in a correction", and another author I watch who blogs at the following site

http://blog.alphascanner.com/?p=402

has indicated in a private correspondence that the hedge funds are now confirmed as seen going through the exit doors.  Furthermore, money flow, as indicated by Effective Volume, is confirmed to be on the outflow side, with the following commentary from the creator of EV:

"Yesterday, at the close, the 20DMF [20 day money flow indicator] issued a short signal that was confirmed by the inversed ETFs. When such a signal is issued, the best is to find [the] weakest stocks in the list of sectors with the weakest price RS [relative safety]. However, still avoid shorting PM [precious metals] related sectors, as this sector is behaving rather differently from traditional sectors."


Contrasting with this are two primary indicators that guide most of my decisions still are "more bullish than bearish".  One is the GGT signal, which compares a stock price with historical levels to get a feel for performance, and the other is an adaptive moving average signal, which is applied individually to each of the actual TSP funds pricing data (not to ETFs).  In both cases each of these signals is still long, weak to be sure, but still long.  Hence, while we have very credible signals all around, we're not seeing a huge "everybody hit the exit doors at once" type of scenario.

So, we are presented with a dilemma. If we move our funds to cash today, we are safe, but we will miss out on any moves upward.  We will burn one of our two moves that we get in the TSP this month.  If we remain invested, we are certainly have downside risk that could expose us to loss of equity.  We also will retain our ability to transfer monies this month.  It's early in the calendar for the month, and we have to weigh whether the upside potential is greater than downside potential (it's even at best), whether any correction will be short lived, if it occurs (your crystal ball is as good as mine), and whether we want to ride out March largely in Cash.

If you are a conservative investor, it may be prudent for you to move 100% to cash, as we have confirmation from credible sources of an orderly flight to safety vehicles, making support of equity investments a tenuous proposition for the next week or two.  Likewise, if you are an aggressive investor, it may be prudent to move a major portion of your funds to cash, but leave some in play, to participate in any rally that could initiate from here.


Given my wife's timetable for retirement, I fall more on the aggressive side, but given that we've not moved anywhere on the upside over the past month, the reward/risk ratio is very poor from my point of view.  So while I'm aggressive, I intend to move to cash with my conservative friends.

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Remember, you are responsible for your own trading decisions, and I am not.  Please do your own diligence, and please take ownership for your actions.

Regards,

pgd