In this month’s article, I outline why I will reverse last month’s decision and return to having 100% of my pension plan assets invested in the SPDR S&P 500 ETF (NYSEARCA:SPY). I will not have a cash position. First, let me review my pension plan performance in November. The market, as measured by the S&P 500 index, gained 8.92% for the month as can be seen in Chart 1 below. As for my pension plan assets, I underperformed the index as my investment allocation gained 6.95%. My investment objective of preserving my capital was met as I did make money. I did not meet my second investment objective which is beating the S&P 500 index. Table 1 below shows my returns and allocations for the month of October and Table 2 below shows my returns for the past 12 months.

I have made changes to Table 2 below after I received a comment from a reader. Table 2 shows new columns to better (more accurately) reflect my investment results. The third column, $100K Hypo, is what my returns would be if I started my account with $100,000 in my first article of this series and followed the allocation recommendations from my articles. The fifth column, $100K SPY, shows the returns of just investing $100,000 and keeping it all allocated to SPY. The percentage returns in the last row show that my strategy returned 6.49% for the last 12 months and simply investing in SPY would have returned an even 13.72% for the last 12 months. Therefore, I have underperformed SPY for the last 12 months by 7.22%. As I’ve stated before, beating the market is harder than it seems.

Table 1 – Investment Returns for November

Table 2 – Investment Returns Last 12 Months

To review the purpose of this series of articles, my retirement account only allows me to buy the following four ETFs: iShares Core U.S. Aggregate Bond ETF (AGG), SPDR S&P 500 ETF (SPY), Vanguard Extended Market Index Fund (VXF), and iShares MSCI EAFE ETF (EFA). I can also have my money in cash. The question is how to decide where and when to allocate money to these various ETFs.

I use my moving average crossover system combined with relative strength charts to determine how to allocate my pension plan assets. My moving average crossover system uses the 6-month and the 10-month exponential moving averages to identify which of the four ETFs are in position to be bought. If the 6-month moving average is above the 10-month moving average, then the ETF is a buy. I call this setup being in bullish alignment. When the 6-month moving average is below the 10-month moving average the setup is referred to as a bearish alignment. When a bearish alignment happens, I don’t want to hold that asset. See Chart 1 below for a long-term look at the S&P 500 index using my moving average crossover system.

Chart 1 – Monthly SP 500 Index with 6/10 Moving Averages

You can see that the moving average crossover system provided some excellent long-term buy and sell signals that would have allowed investors to capture long-duration moves in the index; while avoiding costly drawdowns. Avoiding these costly drawdowns allows me to meet the objective of capital reservation.

I employ this strategy because I do not want to experience a large drawdown with my pension assets. During the 2008-2009 market crash, many people didn’t even look at their retirement statements because they were afraid of what they would find. I submit that if those people had used a market strategy like what I outline in this series of articles, they would have been able to avoid much of the decline during the bear market and consequently would have had less emotional stress during that time.

The following charts show the status of the ETFs that I am allowed to buy in my retirement account.

Chart 2 – Monthly SPY with 6/10 Moving Averages

Chart 2 shows that SPY gained 9.13% in November. SPY reversed last month’s damage by closing above both moving averages. SPY is in bullish alignment. SPY’s big bullish candle is noteworthy. Volume was light for the month, but that could be due to the holidays. Just like last month when I said I must respect the close below the red 10-month moving average, this month I must respect the close back above the red 10-month moving average. I followed my strategy last month, but the results were negative. I failed to beat the SP 500 index because I moved 25% of my assets to cash. Now, I will go back to being 100% invested in SPY. Being wrong is okay, staying wrong is not okay. No mechanical trading system will be right all the time. You must accept this fact and just follow the signals that your system provides. This is the seasonally bullish period for stocks and SPY is in bullish alignment. The odds favor positive outcomes in the months ahead.

Chart 3 – Monthly VXF with 6/10 Moving Averages

Chart 3 shows that VXF had the best performance of the ETFs that I track for this series of articles by closing 11.22% higher in November. Congratulations to those of you who had VXF in your holdings. Well done. VXF is back to being in bullish alignment. VXF remains inside that green box of consolidation. The question is will VXF resolve itself by breaking higher or lower out of this area of consolidation? It would not surprise me to see VXF get to the bottom of the green box and at least touch the $120 price level.

Chart 4 – Monthly VXF:SPY Relative Strength

The VXF:SPY ratio gained 1.91% in November as shown in Chart 4. The ratio remains in bearish alignment telling me that there is no need to allocate money to VXF over SPY currently.

Chart 5 – Monthly EFA with 6/10 Moving Averages

Chart 5 shows EFA rose 8.22% in November. EFA’s chart looks like SPY’s chart. Both closed below their red 10-month moving average, which was bearish and now they closed back above their red 10-month moving average, which is bullish. Also, both are in bullish alignment. Lastly, both now appear to be ready to make a run at new highs. Only time will tell.

Chart 6 – Monthly EFA:SPY Relative Strength

Chart 6 shows that the EFA:SPY ratio lost 0.84% in November. The ratio trades below both moving averages and is not in a position of strength. The ratio is in bearish alignment. On the positive side of things, the ratio may be putting at a higher low. Still, there is no reason to be in EFA versus SPY.

Chart 7 – Monthly EFA:VXF Relative Strength

Chart 7 shows that EFA underperformed VXF in November by 2.70%. The ratio is below its red 10-month moving average. The ratio is in a clear uptrend yet there is no compelling reason to be invested in EFA as shown in Charts 4, 5, and 6.

Chart 8 – Monthly AGG with 6/10 Moving Averages

Chart 8 shows that AGG had a nice gain of 4.59% in November. AGG’s candle was a nice bullish candle closing above the previous candle. Another time that happened was back in November 2022 and AGG rallied for a few months after that bullish candle. Only time will tell if that pattern holds true this time. AGG may be putting in a higher low, compared to October 2022. If AGG closes above the April 2023 high, that would be reversal of trend. Something to keep an eye out for. I will have no exposure to AGG in December.

Chart 9 – Monthly AGG:SPY Relative Strength

The AGG:SPY ratio in Chart 9 lost 4.16% as AGG underperformed SPY in November. The ratio is in bearish alignment and is trading below the area of consolidation as shown by the green box.

In summary, stocks and bonds rallied in November, which marks the beginning of the seasonally bullish period for the market. Despite the bullish results, I underperformed the SP 500 index because I had some money allocated to cash. Now that the market rallied and SPY closed back above its red 10-month moving average, I am going back to being 100% invested in SPY. At this time, no other ETF in this series of articles is outperforming SPY, so I’ll stick with SPY for December.