Re: [TSP_Strategy] Re: Seasonality of Bear Markets

 

Hello Michael, Thanks for another detailed and helpful reply. I'm one of the few in Sarah's TSP Strategy Group who invests in a portfolio of 3 to 5 TSP Funds under almost all conditions, not 1. And, I'm most comfortable making no more than 2 or 3 adjustments over the year when conditions merit. I'm just not comfortable with picking 1 fund leader and holding it for a year or more. Who would have thought on 1 January that the G-Fund would be the TSP leader on 27 August!

The NAAIM Exposure Index you shared (http://www.naaim.org/newsresources/naaim-exposure-index/) is a new input for consideration on what percentage to have in equities. I can understand why that index can help those with a long time horizon (10, 15 or 20 years). Now I'm looking for input to help make sound decisions with a much shorter time line to recover (1 to 3 years).  

Along with a paid TSP monthly investment subscription, I have been using simple 50-day and 100-day moving averages (MAs) as one input on deciding among the C, S, and I Funds. That has generally served me well -- when I actually act on what the data are showing me that is! 

Going into August, I had reduced combined holdings in C, S, and I to 55% because of months of sideways movement in the equities. S-Fund price first began to slide below both its 50- and 100-day MAs the week of 20 July. That should have been my first warning to move even more funds out of S. I think I must have been waiting for the "other shoe to drop," so to speak. Well, the I-Fund began its slide under both MAs around 7 August. Unfortunately, I made no adjustment. The C-Fund hung on until 19 August before its rapid plunge. By then of course it was too late to move most or all funds into F and G and avoid what turned out to be a big drop in the other three.

Fortunately, it looks like much of those losses may be recovered in the weeks ahead. So, no adjustment to my portfolio for now. But, with less than three years to retirement, I'm not sure I'll ever be comfortable at even 70% in equities though. Comments are welcome.

Jim   

On Thu, Aug 27, 2015 at 7:55 AM, michaelhbond@yahoo.com [TSP_Strategy] <TSP_Strategy@yahoogroups.com> wrote:

 

Hello Jim,

I can not break out the best performers exposure levels just prior to the market succumbing.  Mark Hulbert's Financial Digest might, but he I think he only publishes once per month and many of the best timers might be bailing in between issues as they watch the market.  But here's an excerpt from the TSP Smart Investor's August Current Situation Report which I published on 30 July:

"Market Sentiment.  The National Association of Active Investment Managers (NAAIM) Exposure Index typically reached over 85% exposure levels at market peaks in 2014 and 2015 but it has been in a steady decline since 29 April.  During the last two market peaks this weekly survey failed to rise above 60% and with the 29 July rally continued to descend to 50%.  Active managers according to this survey are losing confidence in the market even during rallies and currently lowering their exposure."

This index spends most of the time bouncing between 70 - 100% in equities and it did jump to 63% on 5 August, but this was still much lower than the previous peak.  It was sitting at 41% on 19 August.  The takeaway was that active managers had been reducing exposure as with the majority of stocks trended down even as the S&P 500 was trading sideways.  The S&P 500 (TSP C fund) and being held up by fewer and fewer large companies.  

Indicators like this can be used for those with a long view if you study their historical performance, but not for daily/weekly trading.  It is just one indicator.  One needs an ensemble of indicators that are historically validated to confirm changes in the underlying market conditions.

Hope this helps,

Michael

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Posted by: JM Bud <jmbud2@gmail.com>

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