Interim Market Report 18 July 2014

In my Interim Report of 10 November, with the Dow at 15761, I set a medium-term target of 17200. I reiterated this target a number of times in subsequent monthly reports, and stuck with it during the correction in January.

Last night the Dow touched 17151 before turning round to form a reversal day. I’m going to claim victory here if you’ll allow me the missing 49pts, which considering I’ve captured 1390 out of the 1439 I was looking for, isn’t very much. In any case, targets aren’t meant to be taken literally to the exact point.

This is another massive result for our techniques, and remaining fully invested in the US fund during this time has propelled my pension fund to one record valuation after another. In fact, the fund I’m in – like most US funds – more closely resembles the S&P500 rather than the Dow, and the S&P has gained 10.6% since my forecast compared with 7.7% for the Dow.  Some of those gains have been offset by currency movement, but it’s still been a very good decision.

Now, whenever a target is reached, you should always consider whether there is a justification for staying in. Certainly, by reaching a target, you would be justified in taking your profit and walking away. As you know, I have been 100% invested since May 2009, either in the UK or US. This is my longest ever continuous exposure to equities. I do not believe this bull market is over, but I am now giving serious consideration to going into cash. Why? Well, there are three main reasons: Firstly, the target has been reached. Secondly, the currency isn’t helping. Thirdly, the time of year. I could cite a fourth reason in that there doesn’t seem to be a good alterantive to the US market. I don’t think the key last night indicates anything more than a short-term move, so any decision to come out wouldn’t be based on that per se since I only manage the pension on a medium-term view at least, but it could be considered a factor.

I never rush pension switches and like to think them over. The target was only (more or less) reached last night, so I’ve not had that much time yet. But I want to keep you informed of my thinking, and will of course let you know if I go ahead. At this stage, it’s probably 75/25 that I will.

The Dow was at 8268 when I made the bull market call in May 2009, so what a run it’s been – nearly 9000pts – and I still think my ultimate target of 20000 will be reached, so if I do come out, it will obviously be with a view to getting back in again. Bearing in mind all the above points, there is a fair possibility that this would be at a lower level, so a switch into cash at this time could turn out to be quite profitable.

(c) Robert Newgrosh 2014

Jul 18, 2014