Cash Signal Intact as of Close of Friday, November 16

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By most common measures the markets are oversold and we should be considering entering.  Nothing at this point is indicating that we should move in, and with a short week due to Thanksgiving, I anticipate lower demand in the markets which will cause a general drift of prices.  The analogy is a sailboat without a keel -- you can go a specific direction, but you may also do it sideways ...

Since the sell signal that was effective with the close of November 2nd and which we could have acted on with the close of prices on the 3rd, we have the following market performance:

F-Fund (bonds):  Up +0.18%
C-Fund (mimic S&P500):  Down -3.87%
S-Fund (mimic small cap stocks):  Down -4.46%
I-Fund (mimic international index): Down -2.70%

We've been in cash so we've edged up a whopping +0.04%, which does not keep up with inflation in case you were wondering.  This is better than losing the amounts above, so net-net, we're up on this particular call.

The broad markets peaked on September 14th -- easy to know in hindsight, impossible to know when you're in the middle of the forest.  Since that time we have had the following market performance:


G-Fund (cash): Up +0.23%
F-Fund (bonds):  Up +1.18%
C-Fund (mimic S&P500):  Down -6.87%
S-Fund (mimic small cap stocks):  Down -8.11%
I-Fund (mimic international index): Down -5.44%

Obviously the call to cash on October 10th, a move back into the 16th, and the call to cash on November 2nd helped save some capital, but we did lose some ground compared to November 2nd close:

The trades on November 5th were for a loss, lowering system performance across the board.  Our actual numbers are different than what is above because the above values assume 25% in each fund and in reality, I provide guidance on allocations that I use which are different than 25% in each fund.

If you are not owning a government-sponsored retirement fund but want to proxy into using exchanged traded funds (ETFs), there is a parallel universe:  GGT, using liquid ETFs that mimic the S-Fund (VXF), C-Fund (SPY), I-Fund (EFA), and F-Fund (AGG) has a better behavior overall for the past year, but note that the system is solidly in cash with the exception of the F-Fund (AGG)/bonds, which did signal long back on November 8th at an execution price on November 9th of $16.0324 (F-Fund) and limit buy of $112.14 (AGG).  F-Fund closed at $16.0348 on November 16th, for a gain of +0.01% (yes, 1/100th of a percent), and AGG at $112.21, for a gain of +0.06%.

In my view being long in bonds (F-Fund or AGG) is hardly worth the effort.  They can't go much higher in value since rates are so low.

Here's GGT's view of the TSP proxy ETFs:

Right-click on the image to open it in a new tab or window.

Most short-term market corrections fall in the 4-6% range.  We're a bit below that in the C and S funds, so to state that we're going to get a rebound and set new highs in the market is too optimistic.  I expect a rebound off the bottoms here, but I also anticipate possibly not entering into the markets until December.

I'll send notes out to the board if the behavior changes.  I'm watching both the GGT system and my independent TSP timer on a daily basis, and will post any relevant behavior.  Don't rely on me though -- do your own diligence, subscribe to my dropbox folder to get the ETF status on a daily basis, and you can make your own decisions without me posting here.

Regards,

pgd

Signal Change as of November 2nd Close

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Effective with the close of markets on Friday, November 2nd, my GGT model that I apply to the Thrift Savings Plan has transitioned to CASH for the equity markets and a limited position in the F-Fund.

If the dollar strengthens, as I expect it will, I would expect the F-Fund to continue to appreciate (up +0.1% over the last 30 days).  Correspondingly, the aggressive portfolio will see a position in the F-Fund and the rest of the monies will be in cash.

For the conservative portfolio, everything is in cash (100% G-Fund).

Allocations are as follows:

Conservative:  100% G-Fund

Aggressive:  39% F-Fund, 61% G-Fund

I do note that there is not a significant change of money flow into AGG, which is the proxy for the F-Fund (they both track the same index).  I would like to see prices of AGG remain low while there is "stealth" buying, and this is NOT the case right now:

From www.effectivevolume.com:

The top chart shows that average money flow has been OUT (institutionals are net sellers, not buyers), but the bottom price chart shows that we are at the bottom of a local range so there is a potential to move upward.  I would like to see, in the top chart, that total effective volume be above the 20-day moving average, and more importantly, that the slope of the 20d MA be positive (it is presently negative).

Metrics through November 2nd, 2012, based on TSP closing data started on 11/25/08, and using the rules of the TSP are as follows:

The performance numbers will be slighting different, as the table above assumes 25%-25%-25%-25% allocation in each fund, and I actually allocate using momentum over the last month.

Make your changes by noon Monday, November 5th and they will be applicable the evening of Monday, November 5th.

I am moving 100% to cash (G-Fund).

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

Regards,

pgd

Signal Change as of October 16 Close

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Although I loathe rapid signal changes in any equity timing system, especially during a week of options expiration, I'm compelled to follow the signals generated by my indicators as they are typically better at moving me into and out of the market than I am at discretionary trading.

Correspondingly, although my concern is higher at the present time for being in the equity markets, I am generating the following changes:

Conservative Portfolio:

C-Fund:  25%
I-Fund:   26%
G-Fund:  49%

This conservative portfolio gives us some exposure to equities but protects us on the down side by keeping a good portion in cash (G-Fund).  Note that nothing is allocated to the F-Fund (bonds) and nothing is allocated to the S-Fund (small capitalization companies).  This is because they have not moved up aggressively as the C-Fund (large cap) nor the I-Fund (international index).

Aggressive Portfolio:

C-Fund:  42%
I-Fund:  44%
G-Fund:  14%

The aggressive portfolio is just that.  I see no compelling reason to allocate to the S-Fund at the present time.

I will be allocating to the CONSERVATIVE PORTFOLIO with the close of markets on 10/17.

Regards,

pgd

Signal Change for October 10, 2012

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With the close of markets on Wednesday, October 10th, my TSP models have confirmed a 100% move to cash.

I will transfer 100% of my holdings to the G-Fund, effective with the close today.

Regards,

pgd

Pending Travel and Implications

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All,

I am going to be unavailable to evaluate signals from Thursday, September 20th through Wednesday, October 4th, as I will not have access to the internet for nightly downloads.  This means that I will not be able to notify you if we get a sell signal until after my return.

This obviously leaves a few options for me:

1) Do nothing with my wife's TSP portfolio.

This is probably not a bad approach -- I anticipate that although the road ahead will be rocky between now and The Election, the overall trend is most likely upwards.  My time horizon is still far off before we can tap these monies, so we have lots of time to make up losses if they occur while I'm gone.  This is my preferred approach going into the weekend.

2) Move the TSP portfolio 100% into the G-Fund (cash), and do the same with future contributions.

This is the safest approach, but not necessarily the most prudent.  The issue here is that as the market climbs higher, we'll miss any chance of appreciation since the interest rate on the G-Fund is practically 0%.  The positive with this approach is that there is virtually no chance of losing ground, and the gains since 9/5 (about 4-5%) will be locked in.  I certainly can add back to the account once I return.

3) Move the TSP portfolio holdings to 100% G-Fund, but keep future contributions working.

This isn't a bad approach overall.  This ensures that the gains to date are locked in and if the markets continue higher, any new money will move higher with it.  The downside is that if the markets move higher the amount of gains lost will dwarf anything gained by future contributions (because the base value of the account is considerably higher than the individual contribution).  The upside to this approach is the same as 2) in that gains to date are protected.

4) Move a % to cash and leave the rest to work.

I think that this is the most prudent choice if I don't do 1).  It protects some of the gains to date and limits the losses on the downside.

Please evaluate your personal situation and make your choice as it best suits you.

Regards,

pgd

Reaffirming Long Entry for Sept 5th

With the close of markets on September 4th, my models have indicated that I should move long into the three equity funds (C-Fund, I-Fund, S-Fund).

My allocations are as follows:

C-Fund:  23%
I-Fund:  14%
S-Fund:  63%

If I make the exchange prior to noon on 9/5 the transaction will complete with the end-of-day prices on 9/5.

I have already made the transfer request.

As with all of my postings, you are responsible for conducting your own diligence.  Please take personal ownership for your investment actions.

Regards,

pgd

Whipsaw Signal -- Moving Back to G-Fund

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With the close of markets on Friday, July 13th, the TSP models are signaling a move to G-Fund.  This is a short-term whipsaw and is due to the failed breakout of the C-, S-, and I-Funds from the previous signal.  Volatility is on the rise, but prices are not, and this divergence has historically not been favorable over the long term.

Effective immediately, I am transitioning back to 100% G-Fund and due to the 2x / month change rule, will be here for the remainder of the month.  If today is not too bad in terms of close we may exit this trade near -0.6% for C-Fund, +1.2% for S-Fund, and -1.5% for I-Fund.

Cash (G-Fund) is king.

Regards,

Paul