Was the day and a half rally a trap?
I had mentioned the other day that the market was oversold in the short term but I have been more reluctant lately to point that out here out of fear that some folks would react to the information and be caught in a whipsaw. Those short term situations may only present themselves for a day or two and trying to manipulate your TSP account that finely can get you caught on the wrong side of the fence as you bounce back and forth.
I used to do that myself and I found it counter productive. I also frustrated a lot of members because they had a difficult time following my transfers when I jumped around. Now I try to have a slightly longer term outlook, looking at the bigger picture.
Chart provided courtesy of www.decisionpoint.com
The above overbought/oversold indicator went below -300 on Monday and it set up a short term buy. As I mentioned I used to react to these myself but I found it frustrating because of the day and a half delay. Now I look more at the trend of the indicator. It peaked in June / July and is now in a down trend. So we have or had a short term buy signal within an intermediate term sell signal.
Here's another example of a short vs. long term signal. I like to look at the 21-day moving average of the McClellan Oscillator for buy and sell signals. The oscillator itself gave a buy signal when it went below -150, but the 21-day moving average is still near the neutral area (0) and still heading down.
Chart provided courtesy of www.decisionpoint.com
I noticed several members jumped into the stock funds before the deadline yesterday when the Dow was up over 100 points, only to see the gain turn into a loss before the close. Judging by the emails I received, there was some uncertainty out there. I don't know what will happen today but I'm guessing many of them wish they could take that transaction back. As I said that day and half delay can be costly. I hope for their sake that it isn't this time.
It also shows why it's important to have some kind of plan, system or indicator to assist you in making decisions. They give you direction without letting fear, greed or other emotions dictate your moves. Once you have a proven indicator or system, trust it. You can then be a little more confident in the decision even if the market goes the other way on you for a while.
Again, I don't know what is going to play out in the days ahead but market tops tend to be a little more volatile and you will find yourself tempted to go with the most recent action. That will certainly bring on whipsaws (jumping in and out of stocks frequently at the wrong time) eventually. It happens to all of us but it can be avoided somewhat by having a plan and sticking to it.
That's all for today. Currently 100% G fund. Thanks for reading.
I had mentioned the other day that the market was oversold in the short term but I have been more reluctant lately to point that out here out of fear that some folks would react to the information and be caught in a whipsaw. Those short term situations may only present themselves for a day or two and trying to manipulate your TSP account that finely can get you caught on the wrong side of the fence as you bounce back and forth.
I used to do that myself and I found it counter productive. I also frustrated a lot of members because they had a difficult time following my transfers when I jumped around. Now I try to have a slightly longer term outlook, looking at the bigger picture.
Chart provided courtesy of www.decisionpoint.com
The above overbought/oversold indicator went below -300 on Monday and it set up a short term buy. As I mentioned I used to react to these myself but I found it frustrating because of the day and a half delay. Now I look more at the trend of the indicator. It peaked in June / July and is now in a down trend. So we have or had a short term buy signal within an intermediate term sell signal.
Here's another example of a short vs. long term signal. I like to look at the 21-day moving average of the McClellan Oscillator for buy and sell signals. The oscillator itself gave a buy signal when it went below -150, but the 21-day moving average is still near the neutral area (0) and still heading down.
Chart provided courtesy of www.decisionpoint.com
I noticed several members jumped into the stock funds before the deadline yesterday when the Dow was up over 100 points, only to see the gain turn into a loss before the close. Judging by the emails I received, there was some uncertainty out there. I don't know what will happen today but I'm guessing many of them wish they could take that transaction back. As I said that day and half delay can be costly. I hope for their sake that it isn't this time.
It also shows why it's important to have some kind of plan, system or indicator to assist you in making decisions. They give you direction without letting fear, greed or other emotions dictate your moves. Once you have a proven indicator or system, trust it. You can then be a little more confident in the decision even if the market goes the other way on you for a while.
Again, I don't know what is going to play out in the days ahead but market tops tend to be a little more volatile and you will find yourself tempted to go with the most recent action. That will certainly bring on whipsaws (jumping in and out of stocks frequently at the wrong time) eventually. It happens to all of us but it can be avoided somewhat by having a plan and sticking to it.
That's all for today. Currently 100% G fund. Thanks for reading.
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