Those who have been following GrowMyTSP.com for some time should not be surprised by today’s Alert. If you’re new to the site, welcome aboard! I’ll go into plenty of detail so you’ll understand the rationale, the risk involved, and what we need to see for the next reallocation.

Our goal at GrowMyTSP.com is to be on the “Right Side” of the market. That means being in the stock funds when the overall market is trending up, and managing downside risk, by utilizing the F and G funds, when the market is trending down. We do not have a crystal ball and we do not attempt to time the market tops and bottoms. We respond to the chart patterns that give us the highest probability of continued price advance or manage downside risk on price pattern breakdowns.

Today the S fund broke thru the upper resistance line that began back in mid-February. This came after finding support at its 50DMA (blue moving average line) for the first time since before February; a very bullish sign. We attempted to play this consolidation pattern back on 1 April. Unfortunately for us, the pattern took two more attempts (late April and mid-June) at the 2250 level before finally clearing resistance today. This does NOT guarantee that prices will continue higher BUT, it does put the probability of continued price advance in our favor. Supporting the bullish price movement are the technical indicators (RSI, MACD and Slow Stochastic). All three technical indicators have turned bullish and have room for further advance before hitting over bought levels. That’s the Bullish case…

IF the S fund rolls over, we need to know our line in the sand and what is the value of the loss. If the S fund were to roll over and close below the 50DMA, this would be my line in the sand. A price decline from today’s level to the 50DMA is 3%. Given that my allocation is 25% S fund, my defined risk is 0.75%.

Today the C fund broke thru its upper resistance line at the 4250 level after finding support at its 50DMA on Monday. With a positive MACD cross and the RSI and Slow Stochastic moving higher, the C fund is poised to move higher. IF the C fund were to roll over, a close below the 50DMA would be my line in the sand. A close below the 50DMA would represent a loss of 1.75%. Given that my allocation is 25% C fund, my defined risk is 0.4375%.

The F fund chart continues to look extremely strong, having been in a clear up trend since bottoming in mid-March. The F fund gapped above resistance at 114.75 in early June and volume has significantly increased since the gap up. Until the breakouts in the S and C fund get more established, reserving 50% in the F fund works for my personal circumstances and risk tolerance. IF the F fund were to roll over, a close below the 50DMA would be my line in the sand. This would represent a 0.06% loss. Given that my allocation is 50% F fund, my defined risk is 0.03%.

Bottom Line:

The breakout on the C and S funds put continued price advance clearly in our favor. Because both the C and S funds are now at new all time highs, the potential upside from this level is unlimited. If the market rolls over, we have defined our potential loss at 1.2175%. That’s a great risk/return scenario from my perspective! IF we get support at a retest of the 10DMA or 50DMA in the coming days (before the end of June), I will look to reallocate to 100% stock funds.

As always, I am sharing what I am doing within my personal TSP account based on my analysis of the TSP stock fund charts. This IS NOT a recommendation. You may choose to follow along with my allocations or utilize this post to make reallocation decisions that fit your personal circumstances and risk tolerance.

More to follow this weekend!

Jerry