Peaceful Gains Newsletters » overbought

Semiconductor and networking

Alex — Sun, 07 Mar 2010 22:14:18 +0000

This week, we’re recommending two tech sector funds — one invests in semiconductor companies, the other in multimedia networking. Both funds appear to have good return and risk characteristics, though the semiconductor fund is becoming somewhat overbought. In our Conservative allocation, we’re putting almost everything into utilities.

ETF and TSP letters contradictory

Alex — Mon, 21 Sep 2009 04:08:03 +0000

Question: In the two new newsletters, I note that the analysis of the direction of stocks is contradictory. In the ETF letter, stocks are said to be the thing for the next week while in the TSP newsletter, stocks are seen as risky over the next two weeks. Given that the only difference in the two letters is generally the number of changes that can be accomplished economically, would it not makes sense to wait one week before instituting the changes in the TSP allocation or am I missing something?

Response: I also saw that my algorithm was giving what looked like strange advice this week, so I investigated further. The reason for the differing recommendations is the time scale. Because the TSP newsletter is updated twice a month, while the ETF newsletter once a week, the TSP calculations use a longer time scale.

On the longer time scale used by the TSP newsletter, stocks look overbought. However, on the shorter time scale used by the ETF newsletter, stocks look close to being overbought, but not there yet.

About waiting a week with the TSP newsletter. I recalculate the optimal allocations for the TSP on the first and third Monday of the month. I have not found any benefit to attempting to time the market. That is why I simply recalculate the optimal allocations on a regular basis. There is nothing magical about first and third Monday — it’s just convenient and it splits the month into two approximately equal parts.

High Yield Corporate Bond

Alex — Mon, 14 Sep 2009 01:51:14 +0000

While stocks have been doing well in recent weeks, they could be overbought at this point. We are thus switching into high yield corporate bonds. They have been doing consistently well, and they do not appear to be in danger of being overbought.