Michael, thanks for sharing your insight. However, if you viewed the market from 2009 to 2015 as a bull market, then the recent down turn that bottomed in February is not qualified as as a bear market yet because the three major indexes (DOW, SPX and Nasdaq) are not more than 20% (a typical bear market barometer). Of course, the small caps (RUT and DWCPF) met the bear market qualification, but typically these two indexes are much volatile and swings are much bigger than the other three major indexes. However, the fact that these two indexes hit more than 25% doesn't necessarily makes the market turned to bear market. A good example is markets during 2010 to 2011 period. At that time, SPX was almost down 20% and small caps were down whole lot more than 20%, but what happened afterward? I'd be really worried if all major indexes are down more than 20% which officially can be called "A Bear Market". But there is a strong possibility that the February low could be just an end of a fourth wave (a correction) and the market is moving up for a new high to complete the fifth wave. My wave analysis from 2000 to now is based on a bear perspective. The [A] Wave (from 2000 to 2003), A of [B] Wave (from 2003 to 2007), B of [B] wave (from 2007 to 2009) and the current wave which is C of [B] Wave (from 2009 to ??). For the current wave (C of [B] Wave), typically the C wave can contain 5 sub-wave structures: So I could view the 1st wave up was in 2011 and the 2nd wave down was completed at 2011 bottom, The 3rd wave up happened in 2015 and the 4th wave bottom could be the last February bottom. The 5th wave is always very hard to project, but if the wave structures assumed is indeed true, then the minimum target for the 5th wave peak has to clear the previous high (which was at near 2036). I just applied some Fibonacci numbers to project a possible target and 2236 is one of those potential target numbers and even if the SPX hits this number, that doesn't violate the bear market view if you consider the 2000 peak (around 1555) with an inflation (I used 2.2% annual) adjusted numbers. So after applying inflation of 2.2% for 16 years, the number are somewhere around that target number I projected. Therefore, my cyclical bear market view is still intact even though the SPX moves up beyond 2200. However, I'd be very careful if indeed SPX move above 2136 and continue to move up (Hopefully beyond 2200 though). I'd also hit the "Cash-In" button if SPX could not sustain the current up move and the momentum starts deteriorate before hitting a new high.
Just remember that when the market starts forming the top, we'll see ampul signs of that, but so far I have not seen that typical market top signs yet. Anyway, folks who already are in the market and waiting for it to move high, just be careful and don't get panic until you see an impulsive decline (a large scale moves that contains five wave structures). If indeed an impulsive declining wave finally arrives, then don't hesitate to cash in during the bounce back (for the 2nd wave up move that could reduce your loss significantly).
The main reason that I didn't follow the group's decision on "EXIT" when SPX moved up to around 2020 and moved down to around 2000 was that the down move doesn't looked like an impulsive decline. So instead of moving out with the group at that time, I actually made doubled down and I'm glad that I did double down although majority sentiments were very bearish at that time. Sometimes the market works very mysteriously, Indeed! So sometimes a contrarian bet works. Just like the famous quote from Warren Buffet, "Be fearful when most people are greedy and be greedy when most people are fearful". Well, it's just my two cents worth...Good luck folks! ,
On Sat, Apr 23, 2016 at 8:55 AM, Michael Bond michaelhbond@yahoo.com [TSP_Strategy] <TSP_Strategy@yahoogroups.com> wrote:
I agree with Sarah that we are in a bear market and should remain defensive. She did good moving out of equities during the current rally. Trying to catch the exact top is difficult and chasing returns can be dangerous to your retirement funds. Bear markets are about shedding risk and small caps are considered riskier than large caps. I would avoid small cap stocks (TSP S fund) until the bear market has run its course.The current bear market rally was extended thanks to the Fed's capitulation on normalizing monetary policy – the main street beatings will continue until the wall street's morale improves. And the European Central Bank adding corporate bonds to their QE purchases which has caused spreads to narrow in the high-yield bond market leading to a risk-on rally (to include small cap stocks). And of course the largest buyer of the stock market today - corporate buybacks using debt and compromising their balance sheets. And of course the energy sector bounce which also relieving pressure on the bond markets.The central banks' interventions in the bond markets and to include the BOJ directly buying into the stock market is similar to dipping the thermometer into cool water before reading it and determining the patient (the economy) is okay.The question today is how much of the recent monetary capitulation has been priced into the market. The divergence between economic reality, corporate earnings and the stock market price is near an all-time high. The financial markets can stay detached from economic reality for a long time but tend to close the gap during the summer and fall months. And let's not forget the GAAP corporate profits are at 2011 levels and need to grow 60% to match the stock market's growth since 2011. Even if we return to previous revenue and earnings growth levels, the markets are still extremely overpriced. If you want better returns from your TSP account, you have to wait.I track the ECRI Weekly Leading Indicator. I do not know when the article was written but I see it was recently "published". The article's findings were true a few weeks ago, but the ECRI Leading Indicators has surged recently. The ECRI does not let on as to what they track. Some of the inputs are probably from the financial markets, so manipulations by the central banks could affect the indicator. My economic leading indicators have not improved yet. Since the stock market is a leading indicator it is not surprising they both moved up together, but that also means they could also move down together.The markets do not move in one direction. Bear market rallies are the most impressive and more so with central bank's help. If you held waiting for the rally, when are you going to move to safety? Consider that we are entering the unfavorable season for equities and the SP500 has already had two drops greater than 10% during the last year from these levels. I do not think sitting on the sidelines until next fall will cost you much and it might save you a lot of grief. It also gives us about 6 months to see how things unfold.Invest smart,Michael BondTSPsmart.com
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Posted by: Paul <ur12bfriend@gmail.com>
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Neither the TSP Strategy group, nor individual members, are licensed or authorized to provide investment advice. Any statements made herein merely reflect the personal opinions of the individual group member. Please make your own investment decisions based upon your personal circumstances.
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