Markets Topped

[TSPsmart]

I am looking for a good discussion... The markets have topped.

A double peak is always possible after a good correction and the Fed hitting the QE button again, but by double peak I mean the market returns to no more than plus or minus 1% of the first peak then fades fast. We saw a double peak in 2000 and 2007, but it does not guarantee another one. We are seeing the results this summer of a QE driven bull market being taken off QE life support.

Here is what I see for peak dates.

20 July
TSP C fund at 28. 4005 (S&P 500 index with dividends included)

23 June
Wilshire 5000 Total Market Index (total US market)
TSP S fund at 39.3314 (mid & small caps)
Russell 2000 index (small caps)

21 May
S&P 500 index (price only as quoted everywhere)
NYSE Composite

19 May
DJIA

I have been in the Sell-on-Strength mode since the Spring.

Thoughts?

[mrmaxd]

Do you see the triple peak/hump coming. I hope it blasts off before the end of the month so I can get out without using my IFT for Aug. I missed the last two in June and July or I would probably be considered genus by now. It is much harder to see them before they rise and fall but I'm working on it. We will see today maybe Yellen will say something that will prop up the markets long enough for me to bail. Dang it's 11:45 and I'm tempted to get out now.

[cricketjv]

mrmaxd

If you are in at the beginning of the month, I would think you have three potential moves available for you in August. One would be a move out, and another move back in if things look promising. They you always have that run to safety move available.

If you are out at the beginning of the month, you would have one move to get in, and one move back out.

At least this is the way I've been planning my moves for a while. Let me know if I'm mistaken.

[dougellen1]

you're right on cricket !

[Albucougie]

I believe you are right, and the big picture pattern of what's coming will look like this:

https://pugsma.wordpress.com/longer-term-sp-500-view/

Not as bad as the 2007-09 plunge, but bad enough to step aside unless you are early in your career.

[TSPsmart]

I certainly did not get much discussion on this thread, so I'll tell you what I see.

The stock market is on thin ice with classic topping signs. Weak market internals with growing aversion to risk across multiple security classes does not lend itself to positive returns looking at market history. Since this bull market was not driven by strong economic growth, I don't think its stalling along at 1 - 2% growth will stop the cycle from turning. The QE life support plug has been pulled and I don't think they will consider plugging it back in without a significant event in the financial markets.

I have been in the Sell-on-strength camp since Spring. If the ice thickens up again, then I'll skate again. But we are in the 3 of the worst months for the stock market, so waiting until the stronger months (out of the market) to see what happens seems like a no-brainer.

Hopefully you get another rally to sell into, but don't count on it if you are heavily exposed to the market.

Tread carefully with your retirement funds.

[RGEN]

I’m with Smart. Valuations based on past earnings are very high and current earnings are not catching up to the price. The market may not correct soon but prices going much higher without an earnings push is not worth the exposure. Having a rough year, do not want to make it worse. I am out until after the Fed hike.

[Stu3]

first post! I have been in TSP for 10 years now and only started paying attention to fund values and allocation in the last 3 months….not sure why I kept my head in the sand but I did.

I would love numbers in the C fund to the mid $28s and try and max out and then sell it all and stop buying… All the C fund has been doing for the last few months is bouncing between $27.70 ish and $28.50 ish. No real growth trend… the only way you can make money is buy and sell as it bounces around in that range. I still have 15% of my contributions between C and S and I am considering going all G fund until something happens (i.e. the big drop we are all fearing).

[TSPsmart]

Welcome Stu3,
Sitting in the G fund at this time is prudent and I highlight why now is especially important in my post TSP Charts: C and S Fund Patterns to Repeat?. Sorry, it is too difficult to post charts on this thread. Note that I published the article on 11 August when the market was up over 1%-the short term ups and downs of the market is noise. I am a seasonal analyst and promote seasonal investing, but I also believe that when the tsunami hits it does not matter whether it is low or high tide.

If you read some of my other posts, you will see that I have been harping on the fact that this liquidity fueled stock market has not been driven by economic growth as seen in The Smart Bird – It’s Not the Economy, Stupid and then The Smart Bird – QE4 or Bust. Many of the preconditions for a market top have been in place for awhile, so yes it is a good time to sit on the sidelines and watch the indicators that really matter.

[TSPsmart]

I posted this on 27 July and I am sticking to it. I laid my views again in The Smart Bird: It Should Come As No Surprise.

Sell on strength will still apply in the next rally.

[TSPsmart]

The double peak arrived faster than I thought it would back in July. It only took Fed dovish statements in October with a short covering rally plus the mega cap stocks doing some heavy lifting. I expected the TSP C fund to wait until December if it peaked again, but it came within 1.2% of its 21 May peak yesterday. But market breadth was poor...

the TSP S fund was 8.2% below its 23 June peak
the Total US stock market was 3.41% below its 23 June peak


Could we see significant new highs, probably not soon...

Weak internals, weak breadth, bearish sentiment back below 20%, and the post earning season lull is beginning. With the SP500 back to the level it turned back 12 times over the summer and the TSP S fund back to where it has turned back 6 times since 2014 we are at significant overhead resistance. Plus, the Fed now wants to raise rates in December to save credibility so they tweaked their models inputs so it now says it is time to raise rates.

I think the market is back on thin ice until the end of November...tread lightly. We could see a sell off then another rally before the end of the year.


Quote from July

A double peak is always possible after a good correction and the Fed hitting the QE button again, but by double peak I mean the market returns to no more than plus or minus 1% of the first peak then fades fast. We saw a double peak in 2000 and 2007, but it does not guarantee another one. We are seeing the results this summer of a QE driven bull market being taken off QE life support.

Here is what I see for peak dates.

20 July
TSP C fund at 28. 4005 (S&P 500 index with dividends included)

23 June
Wilshire 5000 Total Market Index (total US market)
TSP S fund at 39.3314 (mid & small caps)
Russell 2000 index (small caps)

21 May
S&P 500 index (price only as quoted everywhere)
NYSE Composite

Quote from August 7th:

The stock market is on thin ice with classic topping signs. Weak market internals with growing aversion to risk across multiple security classes does not lend itself to positive returns looking at market history. Since this bull market was not driven by strong economic growth, I don't think its stalling along at 1 - 2% growth will stop the cycle from turning. The QE life support plug has been pulled and I don't think they will consider plugging it back in without a significant event in the financial markets.

Cheers

[TSPsmart]

Happy New Year, time for an update to my July "Market Topped" call



We got the double peak a bit early as mentioned in my last post. The lack of an end-of-year rally does not bode well for the start of the new year.

An excerpt of my 17 December market commentary posted on my website for all TSP & Vanguard Smart Investor members:

"I aborted the End-of-Year rally this year since our measures of investor aversion to risk accelerated to the downside...Until market internals and the trend in investor aversion to risk reverses, we need to limit our exposure to the market."

I also overrode my two-trades-a-year seasonal timing model in October for the first time ever and continued to sit in the G fund. I've posted my models results here. So you know, I don't provide a trading timing service and I am not inclined to recommend to investors to jump in and out of the markets without good reason. I do provide a long term investor timing service based on the best practices from my research.

I urge all to open up their investment aperture since 2016 currently offers a hostile investment environment.

[TSPsmart]

The markets are once again skating on very thin ice...

[TSPsmart]

The markets were skating on thin ice on 25 January, but it thickened up in late February.

I am sticking with my original post and the dates the markets topped, but the SP500 certainly hasn't given up easily. I think the current rally is gift from the global central bankers semi-coordinated save of the markets starting on 11 February.

I think their current gun is about out of bullets and they are going to need a bigger gun. Ben Bernanke is at it again talking about helicopter money on his blog. Why? Probably the same reason JP Morgan and Goldman Sachs are now saying the long term outlook for gold is looking good once again. But helicopter money will take a bear market first.

GAAP corporate profits are back to 2010 levels! but falling this time. Global debt is at an all-time high and global financial asset prices in aggregate are at an all-time high. Seems to me to be the who's - who of the worst time to own stocks other than for knee jerk reactions to central bank stimulus.

And we just entered the unfavorable half of the year for equities.

While market internals looked good during the rally, this time the best performing index during the bull market the NASDAQ-100 is in retreat ahead of the broader market. It is something to watch.

Options Expiration's is next week and we may visit the recent peak once again, but after that barring anymore central bank interventions I think the bear market will commence its next leg down.

While the ice does not appear thin right here, if you already fell through twice before, I would not venture out into deeper waters - stay defensive.

Cheers

[TSPsmart]

well, well, well

well, well, well, well, well

A triple peak or a breakout? I have to say I don't think new bull markets start at the highest medium price-to-earnings & price-to-revenue in history. Nor the lowest interest rates in history. But there is always hyper-inflation to prove me wrong.

Anyway, the SP500 is sitting 1% above its May 2015 peak and the total US stock market is sitting just below its peak. Seasonality points to only two days left before weakness sets in, so we will see next week.

I found some extra seasonal factors to consider in my readings and posted them in The Seasonality of Surprises

I also posted some TSP charts for perspective in TSP Charts: The Long View

Cheers and enjoy your summer!