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TSP Talk |
Coolhand's Returns:
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Coolhand's current and prior fund allocations. |
2013 Allocation History
| IFT date (COB) |
Allocation |
| 6/20/2013 |
100%G |
| 6/17/2013 |
60% G, 20% C, 20% S |
| 5/1/2013 |
50% C, 50% S |
| 4/4/2013 |
100% F |
| 4/2/2013 |
50% G, 30% C, 20% S |
| 3/27/2013 |
40% G, 30% C, 20% S |
| 3/21/2013 |
50% C, 50% S |
| 3/11/2013 |
50% G 25% C, 25% S |
| 2/22/2013 |
100% G |
| 1/31/2013 |
75% G, 25% S |
| 1/24/2013 |
50% G, 50% S |
| 1/1/2013 |
100% S |
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from Coolhand's Market Analysis
07/01/13
Foreword: I have tried to keep this analysis as simple as possible by focusing on weekly and intermediate term time frames as I’ve found too much information can be counterproductive. The analysis itself is not a mechanical system, but an integrated approach to assess risk and ultimately frame the broader market in a manner that provides context in both short and longer terms.
Long Term Trend: Bull Market
Intermediate Term: Sell
Seasonality: Historically, the first two weeks of July can be strong. First trading day has seen the DOW up 19 of the last 23 years.
TSP Weekly Sentiment: – Neutral. System remains in a buy condition.
Weekly Auto-Tracker Signals:
Total Tracker – No Signal (for the week of July 1st ).
Comments:
So far, no signals have been issued during 2013.
Top 50 – Sell, with reservations (for the week of July 1st)
Comments:
A weekly sell signal has
been triggered for the week of 1 July, however the 3 previous sell signals
this year have NOT been profitable and I note that there was a
relatively significant shift out of stocks on the Total Tracker. In general,
sell signals are not nearly as profitable for this group in a bull market as
are buy signals. I would disregard this week’s sell signal as explained in
more detail below.
Background information: These signals can be useful indicators of weekly
market action. When combined with other market data, these indicators help
give weight to predictive weekly outcomes.
Weekly Auto Tracker Stock Allocations and Trend:
A sell signal has been generated for the week of July 1st. I would disregard this signal given the relatively significant drop in allocations on the Total Tracker. Sell signals have not been working for the Top 50 so this year. Out of three previous signals, all proved to be false. Total stock allocations rose by 22% to a total stock allocation of 89.8%.
No signals generated. However, stock allocations fell by 7.87% from 49.31% to 41.44% this week. An official buy signal would have been generated had allocations fallen by 8%. I think we’re close enough to treat this week’s allocation shift as bullish for the market this week. I note too that overall allocations are nearing the 40% exposure level. If allocations get below 40%, that increases the chances of bullish weekly outcomes.
CHARTS
 AGG (equivalent to our F fund) did manage to recover some of its recent losses, but not enough to suggest a change in the intermediate term trend. There are gaps (circled) that have not been filled, so we could see price rise some more, but I'm not optimistic that the gap near the highs will get filled anytime soon, if at all. Momentum remains negative, but rising, while RSI recently exited from an oversold condition, but remains weak.
The yield on the 10 Year Note managed to drop a bit from its highs earlier in the week, but so far it's not been much of a retracement. If yields are now trending higher in the longer term (months), this adds more uncertainty to an already somewhat fragile economy (mortgage rates are largely tied to the 10 Year Note).
This week's rally turned many indicators back up again, but I can see by this chart that the S&P has yet to get back above resistance and the 50 day moving average. I’ve drawn two trend lines. One terminates in the 1640 area and is a longer term trend line. The other is a shorter term trend line but terminates in the 1620 area. So we’ve got significant resistance above current price. The Relative Strength Indicator is still a bit weak as well. Momentum has managed to rise all week, but since price has yet to close above either resistance or the 50 dma, I can't read too much into this indicator.
Looking at the longer term technical picture of the Wilshire 4500 (equivalent to S Fund), we can see price is flirting with the 50 day moving average. But what I'm really focused on here is the lower intermediate term trend line (terminating in the 850 area). That's another resistance point for this index. So there is room to move higher according to this chart, therefore I have to be open to more upside. RSI is neutral, but rising. Momentum (MACD) is negative, but is trying to turn back up.
The EAFE (equivalent to the I fund) has been seeing more downside pressure than either the C or S funds. There is two large gaps above the current price (circled areas), which may get filled somewhere down the road, so there's reason to look for a rally in the weeks and months ahead, but it's not a slam dunk given global dislocations in various markets such as Japan. Price did manage to get back above the 200 day moving average earlier in the week, so that's a plus. Momentum, while negative, is trying to turn higher. RSI remains weak, however, and price has not been able to get back above the 21 day moving average either.
Conclusion:
Short Term (weekly):
There was a buy signal triggered by the Top 50 the previous week as this group reigned in their stock exposure by almost 25%. After Monday’s significant downside follow through, it may have appeared the signal would fail. But it did not, as the C fund had a weekly gain of 0.91%, the S fund was up 2.03% and the I fund managed to pick up 0.85%. This week, I have a Top 50 sell signal, but those have not been working in this bull market so far this year. However, the Total Tracker came very close to a buy signal with this group reducing stock exposure by almost 8%. I have to say that may be close enough to expect further upside action this week. Seasonality for this week also supports that outcome. Interestingly, our sentiment survey came in neutral with a significant rise in bulls and drop in bears. That seems to conflict with the drop in stock exposure on the auto tracker. Perhaps too many are out of IFTs for the month? I know I am. Aside from these bullish points, there is significant resistance directly above on the charts and Friday saw a sell off into the close. That makes me think we’ll see chop and perhaps volatility next week. I’m not looking for a lot of upside, but I’m anticipating a positive close on a weekly basis for next week. It just may not amount to much though.
Intermediate Term (Several weeks/months):
The intermediate term remains in a sell condition, but it’s trying to turn. Underlying support for this market has fallen off significantly in recent weeks, so that will be a challenge for the bulls moving forward. Add to that the uncertainty of Federal Reserve policy as well as the expectation of a new Fed Chair in the months ahead and the longer term picture gets even more cloudy. But the there were several Fed speakers trying to calm the market last week in the aftermath of the last FOMC policy statement, so I don’t think the powers that be want the market to correct too much. Overall, I’m remaining very conservative in my allocation until the longer term becomes a bit more certain. I do have long positions outside of TSP, so I am not out of the market other than TSP.
Current TSP Market Position:
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G Fund |
100% |
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F Fund |
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C Fund |
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S Fund |
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I Fund |
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Comments: For longer term investors not interested in weekly price fluctuations, some exposure to stock funds makes sense as this remains a longer term bull market. You are the only one who can assess your risk tolerance, but a 50% stock exposure at this time given the uncertainty surrounding Central Bank Policy in the months ahead seems reasonable. Risk for the F fund is much higher now than it’s been in a long while. I’d not take too much exposure to that fund at this time.
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Investing Outside TSP
The below “Model Portfolio" does not represent an actual managed account. These stocks and CEFs are only some of the stocks and CEFs I track in assessing investment opportunities. My own portfolio is not comprised of all the stocks and CEFs at any given time. I am not a financial advisor, but provide this information for educational purposes only. Past performance is no guarantee of future performance. The information provided in this analysis is derived from sources I deem reliable, but I cannot guarantee that information.
Model Portfolio |
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STOCKS |
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Sector/Company |
Symbol |
Buy
Under* |
Dividend** |
Comments |
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BASIC MATERIALS |
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Dover Corp. |
DOV |
$68 |
1.8% |
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Newmont Mining |
NEM |
$28 |
4.08% |
Significant risk to falling gold prices |
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CAPITAL GOODS |
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3M Co. |
MMM |
$98 |
2.3% |
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United Technologies Corp |
UTX |
$88 |
2.3% |
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CONSUMER GOODS |
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Coca-Cola |
KO |
$40 |
2.8% |
Market leader, low risk stock |
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ConAgra |
CAG |
$28 |
2.97% |
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Mondelez International |
MDLZ |
$27 |
1.76% |
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Nestle |
NSRGY |
$67 |
3.26% |
Solid company with a low risk outlook |
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PepsiCo Inc. |
PEP |
$76 |
2.7% |
Consistent, low risk stock |
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Procter & Gamble |
PG |
$75 |
3.13% |
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Unilever |
UL |
$39 |
3.05% |
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ENERGY |
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BP |
BP |
$42 |
4.9% |
Higher risk stock, but outlook improving. |
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Chevron Corp. |
CVX |
$109 |
3.25% |
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Exxon Mobil Corp. |
XOM |
$87 |
2.8% |
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Occidental Petroleum |
OXY |
$82 |
2.9% |
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Buckeye Partners |
BPL |
$57 |
6% |
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Schlumberger |
SLB |
$70 |
1.71% |
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FINANCIAL |
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Aflac, Inc. |
AFL |
$52 |
2.6% |
Higher risk stock, but relatively low debt/equity ratio. |
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Blackstone Group LP |
BX |
$19 |
4.84% |
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Wells Fargo & Co. |
WFC |
$37 |
2.9% |
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Wellpoint |
WLP |
$75 |
1.95% |
While underperforming the past few years, outlook is improving. Reasonable risk for potentially significant long term capital gains. |
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HEALTHCARE |
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AmerisourceBergen |
ABC |
$44 |
1.55% |
Above average company leadership. Relatively low debt. |
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Baxter International |
BAX |
$67 |
2.8% |
Diversified company with good capital appreciation potential. |
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Covidien |
COV |
$63 |
1.64% |
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Eli Lilly & Co. |
LLY |
$46 |
3.6% |
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Johnson & Johnson |
JNJ |
$80 |
3.1% |
Solid company and industry leader.
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TECHNOLOGY |
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Apple |
AAPL |
$400 |
2.7% |
Fiercely competitive market sector, but remains innovative and debt free. |
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Cisco Systems, Inc. |
CSCO |
$23 |
2.7% |
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EMC Corp. |
EMC |
$22 |
1.7% |
Leader in network storage industry.
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Emerson Electric |
EMR |
$53 |
2.85% |
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IBM |
IBM |
$190 |
1.83% |
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Microsoft |
MSFT |
$29 |
2.64% |
Established company in a competitive market. Huge cash reserves. |
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SERVICES |
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Automatic Data Processing, Inc. |
ADP |
$61 |
2.5% |
Strong cash flow and nominal debt. |
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McDonald’s |
MCD |
$95 |
3.2% |
Should remain a solid performer in a weak market. |
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Wal-Mart Stores, Inc. |
WMT |
$68 |
2.5% |
Highly rated company with healthy financial picture. |
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UTILITIES |
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Enterprise Products Partners LP |
EPD |
$56 |
4.3% |
Excellent management team. Significant potential for longer term capital gains. |
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NextEra Energy |
NEE |
$70 |
3.24% |
Operates in high customer demand environment, which is growth positive. |
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PPL Corp. |
PPL |
$30 |
4.95% |
Strong dividend growth history. |
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Southern Company |
SO |
$42 |
4.62% |
Possible environmental rules could have negative financial impact with SO’s coal fleet, but company is solid in other areas. |
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CLOSED END FUNDS |
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Bonds |
Symbol |
Max
Price |
Total Dist. Rate |
Comments |
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Aberdeen Asia-Pacific Income Fund |
FAX |
$6.60 |
6.27% |
Currently trading at a discount to Net Asset Value; large currency risk as a result of a significant exposure to Australian Dollar. |
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Clarion Global Real Estate Income Fund |
IGR |
$8.40 |
6.08% |
Currently trading at a discount to Net Asset Value; Carries higher risk due to uncertain interest rate fluctuations, but it’s not heavily leveraged, which reduces overall risk. |
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Nuveen Equity Premium Opp Fund |
JSN |
$11.50 |
9.04% |
Currently trading at a discount to Net Asset Value |
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Royce Value Trust Common |
RVT |
$14 |
5.01% |
Currently trading at a discount to Net Asset Value |
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* Denotes my target entry points, which are I set in an attempt to avoid overpaying for a stock. These entry points must be adjusted from time to time. I use Morningstar’s analysis in helping to set these limits. Green means Friday’s close is under my price. Yellow means it’s getting near my target price.
** Dividend prices are affected by price fluctuations of a given stock or bond. Therefore, the price entered on this list is only a close approximation. Updates will be provided from time to time.
POTENTIAL PLAYS / ANALYSIS
Covidien, like many other stocks the past few weeks, has been trending lower. From a valuation perspective, it’s undervalued according Morningstar. It appears to be finding support around its 200 dma now, but is about to hit resistance (not all trend lines are perfect). MACD is negative, but slowly turning higher. RSI has bounced in recent days, but remains weak. I’d wait to see if this stock can close above that resistance line, but we’re in the early stages of the seasonally weak 6 month cycle too and the intermediate term is down, so we could see price move back down to the 200 dma . Perhaps lower.
Nestle is also an undervalued stock. It’s chart looks much like Covidien’s, except price remains below the 200 dma. MACD is quite negative, but trying to turn up, while RSI has been rising from near oversold levels. It is still negative, however. I also note that price retraced all gains since the beginning of the year earlier this past week. The low may be in on this one.
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Disclaimer: |
This information is for educational purposes only! This is not advice or are commendation. We do not give investment advice. Do not act on this data. Do not buy, sell or trade the funds mentioned herein based on this information. We may trade these funds differently than discussed above. We use additional methods and strategies to determine fund positions.
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20min. delay http://finance.yahoo.com
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TSPtalk.com assume any liability for any loss that may result from reliance
by any person upon any such information or opinions. Such information and
opinions are subject to change without notice and are for general information
only.
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