It's Day Eight /// Surprise ... Surprise ... Surprise!!!

Old_Skeet

as Gomer Pyle use to say.

In checking the markets early this morning I am finding, as I write, that the S&P 500 futures are green along with Greater Europe and most of Greater Asia with the exception being China.

The past two days have been mostly up markets and we have now moved into earning season. I am thinking this upward movement will continue even though year-over-year earnings numbers will most likely be behind those of a year ago they will be ahead of the third quarter numbers and continue to improve as we move through the year. The improvement in earnings should provide fuel to propel the markets upward. Will we reach new highs? Perhaps.

Remember, big money is a big driving force in the markets these days and it is not like it used to be when our fathers were investing as the markets are highly leveraged today by big money plus there is the flash crowd. Should money be called home as interest rates rise and the cost of capital increases this will put some selling pressure on stocks. With this, I look for volatility in the capital markets as interest rates rise.

I am watching my asset allocation closely and might rebalance down to about 45% equity, from 50%, as we get closer to spring and stocks once again approach peak, by my thinking. I am looking at an allocation of about 30% cash, 20% bonds, 45% equity and 5% other. Within equities split 30% domestic and 15% foreign. Come summer I am looking for the traditional stock market soft patch ... and, then come fall I am looking for a rally on and through Christmas. October might become a little bumpy. My current target for the S&P 500 Index is 2140 or thereabout. A new high. Year end target, your guess is just as good as mine.

Since, we are now beginning to see daylight in the current market rough patch … I thinking … it’s time for me to stop these postings. But, time for me to still do some more pondering.

Perhaps, @Scott will venture back and open a new thread on ... "What are you Buying, Selling or Pondering?" Boy, I sure do miss that thread.

I wish all … “Good Investing.”

VintageFreak

I will shout from the rooftops if you are right and we hit 2140, but you gotta tell us why your target is 2140 and not 2142.

Sven

@Old_Skeet, done my share of rebalancing in November. Still pondering what is unfolding before committing cash.

Old_Skeet

@VintageFreak, Thanks for stopping by and making comment. I'm thinking thereabout covers 2142. Not saying this will come about soon but I do think we will see at least 2140 before yearend. And, I am not loading equities on the come that it does as I have plenty in play at this time. Sould 2140 come to be during 2016 then I plan to trim equities back to about 45% in my portfolio's allocation at this price valuation in the 500 Index.

Old_Skeet

@Sven, Thanks for stopping by and making comment. Heck, I have been rebalancing and reducing my allocation in stocks since 2014 and raising cash as equities became overbouht by my thinking. I am also thinking it wise to have some cash on the sidelines during times like this. Seems now, when stocks start to rally sellers are coming in and trying to reduce their equity positions by selling into the rally. For information purposes my next buy step is 1870 should stocks (S&P 500 Index) pull back to this level. Then, I most likely will buy a little either in DEQAX or in FDSAX as these two funds are the smallest positions in their respective sleeves and I'd like to increase my position in them but at what I consider to be good opportunity.

TSP_Transfer

In Double Line's presentation by Jeff Gundlach yesterday, he related a story of the Tampa Bay vs Raiders Super Bowl game in 2003.He was listening on the radio while walking/running during half-time.Tampa Bay was ahead, already up 20-3 and just before the 2nd half kick to Oakland ,radio analyst Boomer Esiason,stated that Oakland needed to get a score to get back in the game or 'this could get out of hand quickly". First play of the 2nd half Tampa intercepted a pass returned it for a touchdown for a 28-3 lead.Boomer told listeners "guess what folks ,it's out of hand"
https://www.google.com/finance?q=INDEXSP:.INX&ei=yLCWVoHkMomPmAG12rmoCg

https://www.google.com/finance?q=INDEXRUSSELL:RUT&ei=H7GWVuHNL8mlmAHq0pb4Aw

Negative Momentum Weighs On US Equity Sectors By James Picerno | Jan 13, 2016 at 07:05 am EST .capitalspectator.com
Although energy’s in a class of its own in terms of red ink, upside momentum generally is in short supply across the sector landscape. Measured by 50- and 200-day moving averages, only two ETFS are posting positive price momentum through Jan 12: Consumer Staples Select Sector SPDR ETF (XLP) and Utilities Select Sector SPDR ETF (XLU).

For additional research on the sector ETFs cited above, here are links to the summary pages at Morningstar.com:
Consumer Discretionary (XLY)
Consumer Staples (XLP)
Energy (XLE)
Financial (XLF)
Healthcare (XLV)
Industrial (XLI)
Materials (XLB)
Technology (XLK)
Utilities (XLU)
Telecom (VOX)


http://www.capitalspectator.com/negative-momentum-weighs-on-us-equity-sectors/

Added 01/13 10:45 PM Momentum Darlings Hit Wall in S&P 500 as Hedge Fund Stocks Slide

January 13, 2016 — 4:55 PM CST bloomberg.com

Selling accelerated as a rout in junk bonds, oil’s collapse to $30 a barrel and the biggest tumble in small-cap stocks since August sent the S&P 500 through 1,900, a level it’s closed below only four times in the past 14 months. Losses are snowballing at a time when options data suggests professional investors own fewer hedges than they did last summer and the Federal Reserve has started raising interest rates.

“The exits are narrower in these stocks, it’s incredibly difficult to catch a falling knife, and given the level of uncertainty right now it makes it even more difficult to go in and buy,” said Benjamin Dunn, president of Alpha Theory Advisors, which works with hedge funds overseeing about $6 billion. “There aren’t many places left to hide. A lot of people are using high-yield ETF options to hedge their equity risk, and that’s not working today either.”

Shares of junk-rated stocks bore the worst of the selling as a basket compiled by Bloomberg of below investment-grade companies dropped 3.8 percent. The group, which includes Chesapeake Energy Corp. and Cliffs Natural Resources Inc., has lost 15 percent since the start of the year, double the S&P 500’s loss.
http://www.bloomberg.com/news/articles/2016-01-13/momentum-darlings-hit-wall-in-s-p-500-as-hedge-fund-stocks-slide

Ted

MFO Members Its day nine, and the S&P 500 is at 1900. Ouch !
Regards,
Ted

Old_Skeet

Hi TSP_Transfer and others,

Yep... it sure seems this way (things starting to get out of hand).

I'd say the current selling is feeding upon itself as some investors are selling because others are. I thinking th flash crowd and program trading is making this worse than it would otherwise be. I was seeing value in the market when I bought a little last week at 1922 on the S&P 500 Index. If we reach 1870 I'll be buying again ... and, then again around 1815 ... and, then again around around 1760 ... and, then again around 1710. Hopefully, we want see it go to 1710 but if it does we are at market recession being 20% off the recent 52 week high. That is my five down trending buy steps which would provide me an average buy around 1815 or 15% off the recent 52 week high. Then on the turn I'll buy at 1760 which will lower my average buys to about 1805. Then above 1805 I'll be making money assuming we see a pullback down to 1710 (20%) off the recent 52 week high ... and, the market turns somewhere around the 1710 level.

Hope we don't see these levels ... but, you now know my buy strategy, as a buy and hold investor, if the market keeps tanking. I might even put a spiff in play.

PRESSmUP

Hi Old_Skeet

A few weeks ago, a fairly well known smart guy on the TV spoke of possible support levels on the S&P. Seems like we blew through the first at 1968 and are on our way to test the next at 1862. If that doesn't hold...he spoke of 1620 before we might find our way back. For what it's worth...

The only reason these stuck in my memory is due to the relationship with famous dates in our history.

press

vkt

This is very reminiscent of the rumble at the beginning of 2008 when it felt just like a long due correction as it does now and people were making similar plans for dips and projections for recovery. If it is indeed a 20% or thereabouts kind of a predictable correction, then a strategy like old_skeet's could pay off. If it takes off in just a few days time from now without hitting his targets, he wouldn't be able to put his cash to work fast enough to catch up with those that just held. On the other hand, if this is the initial shock of a contagion like situation (and this is the only thing that worries me given the unusual movements in oil and the fast dropping financials, who knows what our betting geniuses may have been up to this time), then none of this planning and projecting matters. It all depends on how fast and how well it recovers.

Nobody knows what is going to happen and how bad the turbulence will be. So far, it is just fast moving money that is trying to front run each other and pulling out of riskier assets. BioTech bubble seems to be collapsing because of it as it should. Some tech unicorns may be in trouble.

I am just sitting fully invested at 79% equities now with the declines in my tax advantaged portfolio that I cannot touch for a while and around 70% in cash in my taxable portfolio that I may need to access in the next 5 years. Easier to weather bear markets in the short term and not miss a bounce back if it happens which will help the long term financial health. Don't have to keep track every day to react if some milestone or the other happens. To each his own.