New Buy Signals for Monday, February 7th

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Over the past week the three primary funds of the TSP signaled entry.  Here is the 1-month performance chart of the 4 primary funds available with TSP:

Here is what my personal GGT system has to say about the TSP funds:

Essentially, we have long signals for the equity funds and we have cash signals for the bond fund.

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Here are the allocations going into Monday, February 7th:

3-Fund Portfolio

This portfolio invests in only the three primary equity funds, using the G-Fund as a safe haven.  This is an aggressive fund in that there is no bond component:

1. G-Fund:  0%
2. I-Fund / EFA:  46%
3. C-Fund / SPY:  29%
4. S-Fund / VXF:  25%

4-Fund Portfolio

This portfolio invests in all available equity and bond funds from TSP, and uses G-Fund as a safe haven.  This is a more conservative fund because of the bond component.

Note that the bond component is in CASH right now.

1. G-Fund / Cash:  7%
2. F-Fund / AGG:  CASH
3. I-Fund / EFA:  40%
4. C-Fund / SPY:  28%
5. S-Fund / VXF:  25%

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Your actual situation may be different so adjust your cash position/allocation percentages accordingly with your risk tolerance.  I do suggest keeping the same ratio though, as this has been proven in the past to optimize returns.

My trades will be effective the evening of Monday, Feb 7th.  I am a 3-Fund Portfolio person ...

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

Regards,

pgd

A View of Starting 2011...

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And a new year begins ....

I'm starting 2011 in cash, having come off of a two week vacation over the holidays.  Volume within this time has been drying up, and I must say it has been doing so rather dramatically, so the availability of buyers and sellers has been limited.  It's never a good time to play the market when this is occurring, as the numbers can go against you as well as with you, so my conservative approach is/was simply to jump to the sidelines.

Overall View - 3-Fund

Here's a bird's-eye view of an index created using EFA (I-Fund), SPY (C-Fund), and VXF (S-Fund).  Right-click on the image to open in a new tab or window:

In a macro sense, the composite index is bullish.  The daily highs are above the 13d EMA, causing Bull Power to be positive.  Reinforcing this is that the daily lows are above the 13d EMA also, resulting in Bear Power being positive, which is bad for the bears.  Two different methods of calculating Elder's 13-day Force Index are "green", telling me that both these methods are resulting in numbers that are positive.  This too is bullish.  The 3rd ribbon from the top is also green, which is the 2d Force Index, and it is telling me that the index pulled back on Friday, indicating that we can enter the index (if this were possible) on Monday if everything moves higher.

A crack in the bull ice which may prevent me from entering a full position is shown in the MACD window under the ribbons.  What you see there is that the MACD Histogram is underwater (below 0), indicating a loss of momentum in the index.  This is visually seen too by the gradually decreasing MACD and MACD Signal lines -- they have recently crossed (histogram moves negative) and are trending downward.

On a bearish side the slope of the 13d EMA (red) is below the slope of the 34d EMA (black), and both are pointing down.  This too confirms/validates the loss of momentum.  If they cross below 0 we'll have no doubt about the portfolio nor where we want to be positioned.  As a personal note I rarely enter a position when the  slopes are pointing downward ...  This all being said, the slope values are still positive, so if they turn upward in their direction, I'll move back in.

Finally, the portfolio is still bullish overall.  The prices are above the 13d EMA, and all of the longer EMAs have a steady, upward-pointing direction to them.

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I'm simply going to wait for a signal to re-enter, most likely the slopes of the 13d and 34d reversing and starting to move upward.  Stay tuned.

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Remember, you are responsible for your own investment decisions, and I am not.  Please take ownership for your actions.

Regards,

pgd

On vacation until January 2nd

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The blog will resume the weekend of January 1st.

Happy holidays and let's make this a prosperous 2011!

Regards,

pgd

VXF / S-Fund Signals Long, I-Fund/EFA and C-Fund/SPY still in CASH

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This will be rather brief, as we are in cash.

C-Fund / SPY

Overall, the C-Fund / SPY has individually been signalling cash since 11/12 and at the present moment, is maintaining that stance on the daily charts.  The present level of the C-Fund is $14.3578 / share, and with the SPY at $118.84 / share, the ratio between the two is about 8.2770.  GGT is indicating that we possibly could move back long again if the SPY moves above $120.96, so this would be a C-Fund price of about $14.62.  Hence, watch for closings above that level, but note too that this is a projection into the future, which needs to be re-done on the date of the crossing to determine validity.

S-Fund / VXF

The S-Fund /VXF signal has moved back long, as of 11/18, but I missed it.  The signal was tested again on 11/23, and presently remains long although I'm still sitting in cash.  I'm not convinced that this isn't a sucker rally for the VXF but I have to trust the signals, hence I'll throw my hat into the ring and move long as far as the VXF is concerned.  Had we moved on the signal date, the effective date would have been the close of 11/19, and the VXF price then was $51.08 as of that close, or down 1.7% from where we are today.  As you will see below, we would have allocated around 61% of our monies, so actual loss as of the close this past Friday is about 0.65%.

The S-Fund is trading at $19.9449 and the VXF is at $51.63.  This implies that the ratio between the two is 2.5886.  VXF is telling me that we're in trouble below $50.37, which is $19.46 for the S-Fund, so we've a bit of room above the "trouble zone".  We'll see if this trade works.

I-Fund / EFA

The I-Fund/EAF signal has officially been signalling cash since 11/12 and with the action this past week, has confirmed the move to cash on the weekly chart.  This is incredibly bearish and we'll need some time to get over this hurdle.

This being said, the I-Fund is valued at $18.9231 and EFA at $55.47, suggesting a multiple of 2.9313.    For the present moment EFA would need to clear $58.82, or an I-Fund value of $20.07.  This is quite a bit above where it is right now, and while possible, I don't see it in the near future.

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Performance and Allocation

To date, over the last 30 days, we have the following performance:

• SPY:  +0.34%
• VXF:  +4.46%
• EFA:  - 2.91%

Correspondingly, allocations for funding are as follows:

• SPY -- in cash and will stay in cash, but allocation is 31%
• VXF:  61%
• EFA:  -- in cash and will stay in cash, but allocation is 8%

I am not sure that the VXF entry won't be a sucker's rally but I learned to trust the signals long ago.

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Trading Plan for Monday, November 29th.

Because I have placed 2 intra-fund transfers this month, I cannot transfer this money until after 12:00 on Tuesday, November 30th.  I have placed an order at www.tsp.gov for a contribution allocation to reflect new additions at 61% of the S-Fund / VXF, and leave the remaining 39% in the G-Fund (think money market). Follow me at your own peril.

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

Regards,

pgd

Move to Cash 11/17/10

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Anticipating a dead-cat bounce today (Wednesday, November 17th), hence I have placed an order at http://www.tsp.gov/ to move all my account monies to CASH.

Please go to http://greekgodtrading.blogspot.com/ to review rationale on the present market climate and why I am taking this action.  Basically, my primary indicator, the GGT Long-Cash Ratio (LCR), has been heading down for 4 days solid and the Elder 13d Force Index simply confirmed the action.

Here's the composite chart using the 3-ETF/3-Fund equal-weighting approach:

If anything on the chart above is not clear, specifically why this chart is breaking down, then please post a note below and I'll respond for all to review.

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

Regards,

pgd

November 7th Weekend Update

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This week saw a transition from cash back to a 50% invested position.  I moved into cash on the October 19th signal (actual transfer date was the 20th), and if we equally-weight between the three funds that I hold, we missed out on 4.1% gain in 11 days.  This is a big loss of potential gain so it's illustrative to understand the cause/effect that got me to that decision the evening of the 19th.

Here's a chart of the 3-Fund TSP, as represented by the following ETFs:

• EFA / I-Fund
• SPY / C-Fund
• VXF / S-Fund

As with all my charts, right-click on any figure to open in a new window:

Signals telling me we were in trouble on October 19th:

1. The first ribbon bar on the top is the 13d Elder Force Index [   FI(13)  ], calculated with an exponential moving average (EMA).  It turned pink, indicating that the FI(13) had moved negative.  This is generally an immediate sell signal.
2. The MACD window shows signal lines as well the histogram.  Here, we had the MACD historgram moving negative on October 19th, which generally is another immediate sell signal.
3. The 13d/34d EMA Slope window shows the slopes of the 13d EMA of the price of this group of ETFs, as well as of the 34d EMA.  We see that the faster one (13d, red) crossed the slower one (34d, yellow) from above, and if not a sell signal, certainly indicates that we have problems.
4. The price window contains an additional EMA in green, which is an 8-day signal.  General thought and good practice is that if a price closes below the 8d EMA of it's price series, then it should be unloaded.  The composite index of all three ETFs closed below the 8d on October 19th, as did all of the underlying ETFs. 

Hence I threw the towel in and moved to cash on October 20th.

In hindsight, I should not have relied on the index chart to make a broad decision about all the constituent holdings.  Specifically, although the 3-ETF composite chart above is poor, here is the Vanguard Extended Market Index ETF's chart, which is my proxy for the S-Fund:

Of particular note here is that the Elder Signals [ Bull Power, FI(13) ] have never transitioned below 0 during this last effort.  Although the MACD histogram, 13/34d EMA slopes, and price series took significant hits on Octobe 19th, these were mitigated by the positive (and strong) nature of Bull Power and the FI(13). 

VXF experienced a 4.7% gain while I was in cash.  Had I held onto VXF, which we had a 36% allocation, we would have maintained a 4.7% x 36% = 1.69% gain over the last 11 days, reducing our apparent loss from +4.1% gain - 1.69% = 2.41%. 

Putting this in perspective, a 4.1% gain in 11 days is equivalent to an annualized gain of 279%.  Being able to gain +1.69% in VXF is the equivalent of an annualized gain of 74%, so every little bit helps.

With respect to the SPY/C-Fund and the EFA/I-Fund, their charts look the same as the 3-ETF index, so I would have sold them despite the VXF signal.

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So a question was emailed to me about why I'm only 50% invested, now that we've apparently entered a new bull leg.  The simple answer is that we are incredibly overbought on the short-term indicators, and I'd like to see a pullback to put the other 50% on the table.  Stay tuned, I'll let you know when (and if) I move the rest of the funds into play.  I note though:

1. We are at extremely high levels in terms of many of the indicators.  Of specific importance is that the MACD is already in the upper half of the chart; the run can last but it's not the same type of run as from below.
2. All the individual ETFs are well above their 8-day value.  This is incredibly overbought, and I fully expect a pullback.
3. If we pullback and hold the 8-day I'll move the rest in, provided that the rest of the market isn't collapsing around me.  I'll determine the latter using the slopes of the 13d, 34d price signals as well as the GGT LCR movement and slopes.

Make sure you pay attention to my other blog:  http://greekgodtrading.blogspot.com/, as well as my trading partner Hsin's:  http://athenastrategytrading.blogspot.com/, as these will give better indicators as to what we are thinking about the markets and a potential entry.

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Disclaimer:  As of this writing I am presently long in the I-Fund, S-Fund, and C-Fund, as well as am holding positions in EFA and VXF.

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Remember, you are responsible for your own trading decisions, not me.  Please take ownership for your actions.

Regards,

pgd

TSP Portfolio Signals LONG Across the Board

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While it pains me to say this, all my indicators show that we need to move back into stocks.  Even the 4-Fund version, which includes the F-Fund/AGG, is indicating such a move.

Before we go there though, let me explain why this one is "different".  Luckily, I can talk about now as well as about the past from the same chart:

The first thing that I want to draw your attention to is the area listed as 9/10 -- September 1st, 2010.  Now go up to the window entitled "MACD" directly above that date.  See where the MACD lines crossed, and the status of the MACD Histogram on September 1st?  The MACD and MACD signal lines were NEGATIVE, they crossed in NEGATIVE territory, and for the next two months they moved upward, finally crossing from above right around October 19th (this is when I issued my sell signal).  Furthermore, take a look at what the Elder Force Index (EMA and SMA) signals were doing just prior to 9/1/10 and then on the signal date after 9/1/10. 

Fast forward to now, which is the right side of the figure -- November 3rd, 2010.  Here we have a number of things happening, but most important, we have the Elder Force Index (EMA and SMA methods) both crossing back into positive territory (green), we have the MACD Histogram almost ready to cross over into positive territory, and we have the slope lines of the 13d and 34d EMAs crossing each other from below, which is a very bullish sign.

Given all of this, you would think it's time to jump into the TSP with both feet.  Well, "this time it's different".  Here's why:

We may certainly move aggressively higher in the coming days -- your crystal ball is as good as mine.  BUT, there is an arguement for not putting all of our eggs in the market:

1. The MACD line and the signal line are on the positive half of the chart window.  They can certainly move up, but they have a historical "maximum value ever achieved" and according to my records, we've only exceeded the recent peak only in the March/May 2009 time frame -- all others have turned down when reaching the region we just reached.  The past isn't a predictor of the future but where you start the future from (e.g., reference point) is a very telling indicator.  A better place to start would be if the MACD lines were in the bottom half (negative).  Well, they are not, so we should be careful.
2. The slopes of the 13 and 34d EMAs are already positive.  The crossing from below simply makes them bullish.  While they can rocket upward from here, they can't go *much* further rom here -- the higher values simply cannot be sustained.  Note that this is a metric of how fast the bull is raging, and right now, the bull is clipping along at $0.2993 / day for the 13d EMA and $0.2995 / day for the 34d EMA.  This is a good, solid gain on a day for day basis, so going up dramatically from here, while possible, isn't too likely for any length of time.

Given these things, and other minor indicators, I think it prudent to hold back 50% of our holdings in Cash. 

In terms of allocations, here is what I'm looking at with 50% in the G-Fund (money market):

3-ETF Portfolio:

I-Fund/EFA:  16%
C-Fund/SPY:  15%
S-Fund/VXF: 19%

4-ETF Portfolio:

F-Fund/AGG: 3%
I-Fund/EFA: 15%
C-Fund/SPY: 15%
S-Fund/VXF:  16%

If you make this transfer at http://www.tsp.gov/ prior to 9 a.m. or so Thursday morning then it should go into effect at the end of the day.

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Remember, you are responsible for your own trading decisions, not me.  Please take ownership for your actions and do your due diligence.

Regards,

pgd