posted on 25 May 2016
NOTE: I have redesigned the 401k plan manager to accurately reflect the changes in the allocation model over time. I have overlaid the actual model changes on top of the indicators to reflect the timing of the changes relative to the signals.
No Change - But Risk Increases
As discussed in the main section of the newsletter, the short-term dynamics have begun to deteriorate. With the longer-term structures still negative, the potential of a bigger correction has risen in the last week.
While the market remains in oversold territory, the failure to reclaim the 50-dma raises some red flags. While there is no need to make any changes to portfolios this week, as I have repeatedly stated, the markets are currently fraught with risk and should not be taken lightly.
As I stated two week's ago:
That advice remains again this week. I try and remain very sensitive to making changes to the model since many 401k plans have limits to switching funds.
For longer-term investors, the markets have made virtually no progress since January of 2015. Therefore, there is little evidence to suggest stepping away from a more cautionary allocation...for now.
If you need help after reading the alert; don't hesitate to contact me.
Current 401-k Allocation Model
The 401k plan allocation plan below follows the K.I.S.S. principal. By keeping the allocation extremely simplified it allows for better control of the allocation and a closer tracking to the benchmark objective over time. (If you want to make it more complicated you can, however, statistics show that simply adding more funds does not increase performance to any great degree.)
401k Choice Matching List
The list below shows sample 401k plan funds for each major category. In reality, the majority of funds all track their indices fairly closely. Therefore, if you don't see your exact fund listed, look for a fund that is similar in nature.
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