That was an excellent start to the month of May specially for one of our index. What a rip that was. Do you guys remember my goal for a return each 12 month period? No PIP that is a double digit loss and be very happy with a PIP of 7% or greater. This is why I mention this. 7% divided by 12 month is approximately a .58% gain a month. So any month we get a gain greater than .58% is an awesome month. May of 2016 I had a gain of 1.17% gain, so having another awesome May is required to maintain my current PIP or to even have a chance for it to rise. So how good was this first week? I had a 1.15% gain this week and I’m already hoping that holds throughout the entire month of May. This is also were greed begins and the monthly moves helped to solve that emotion. I’m normal, if i have a gain, I do not want to give it back and it would be nice to even get more. That is greed. So if I just sit back and just let the monthly moves decide for me, the emotion of greed is gone and watch the show unfold till the end of the month. Take the emotions out of investing. The older you get, the more money you have in your TSP, and when the time arrives and you cannot put any new money into your account, the more important these monthly moves are going to be to you. Ok, enough rant, let’s look at the charts.
Yes the S&P 500 had over a 1/2% gain last week, but when you actually look closer, it has basically been cruising sideways for the last 8 to 9 days. Volatility is low and the DMI is positive, so I would expect that a slow grind uphill is most likely. I like slow grind uphill because there is no drama. So we watch.
The Small which was our leader to the upside has suddenly turned in the other direction. We actually had a sell warning fire Thursday and then Friday that was cancelled and a higher pivot low was formed. What I would expect the Small Cap to do from here is rise up and take out that last high of $1229.32. This would keep the pivot highs and lows forming steps that go up. So let’s see what happens.
Bonds, as far as the daily chart goes, has been a buy for while now but it has been a shakey buy at best. The CBL has been moving up as price has moved up. The 50 day moving is rising, but very slowly. The problem here is that all these indicators and price are all at the same level so we are going to get a lot of false signals. To help backup this thought the longer term indicators the weekly and monthly charts are a sell and have been a sell October of 2016. The DMI is also starting to look like a negative signal will be fired next week. I still see no reason to bottom fish in bonds and will stay out.
The international index is our shinning star at this moment in time. What a rip Thursday and Friday. Volatility is neutral, which isn’t bad or good. DMI is starting to look a little overcooked and would make you think a slow down or pull back is approaching. I tend to agree with that thought process. But do you see that red downtrend line at the top of the chart? Do you see that price has broken through that level? Do you know how significant that is? Let me show you a zoomed out look of the weekly chart that dates back to 2009. That’s right, 7 years ago, 2009.
Above is a chart that has very large wedge that actually started to form the middle of 2014, but dates back to 2009. A breakout of this very long term is a big positive to this index. It doesn’t mean that we are rip straight up forever, but it is a major indication that new very long term run is developing. If you followed my monthly moves, you have been running uphill getting all these gains since February 1, 2017. So we got in pretty close at the bottom. Now the question I have is how do you measure a move out of this breakout. It is complicated, but the short answer is $102.76. That’s a 56% move to the upside. That could take years to prove, so we take it as information. What I truly expect to happen is price to reach the next resistance point which right behind that second red down arrow on the chart. That price is $68.50. That move is only 3 points or 4%.
So in conclusion for the I-fund, enjoy the rips and let’s hope all the indicators are correct. Either way, ride the monthly move.
Overall Conclusion: This month is always a turning point for the Summer doldrums and some volatile trading. I hate the markets in the summer. I sigh and just let my monthly moves take that anxiety away from me.
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