* Alert * : 26 February 2021
It’s been an UGLY week for the TSP stock funds but an even worse week for the F fund. The basis for the collapse in the F fund is really the problem here. Most of the public is fixated on the inevitable passing of another $1.9Trillion stimulus package AND the Federal Reserve’s statement that it will keep rates low. Conventional wisdom says that these 2 things should be VERY good for stocks. Unfortunately, the bond market is screaming something different… The bond market is clearly concerned about an impending rise in inflation and interest rates. As rates rise, companies must pay a higher rate on money they borrow which will push earnings down along with stock prices. Because the price of bonds goes down as rates go up, the F fund is tanking. IF this continues, the G fund will be the only safe haven… We will discuss more about this, and the Macro picture, in the Weekly Update Show and the Newsletter this weekend.
Looking at the 1 year chart of the C fund, I’m still cautiously optimistic. Having said that, the short term chart is showing signs of a serious breakdown. It’s been a wild 2 weeks for the market. As of Friday’s close, price is fighting for support at the 50DMA. IF support holds THEN we could continue on to new highs. This set up is very similar to the short correction we had in late January so, it is possible that support holds and we move higher. Having said that, based on the intra-day chart, my personal circumstances, and risk tolerance, I have decided to manage the risk by taking some money off the table…
The 4 month hourly chart of the C fund shows that the trend which began in mid-November is still intact. My problem is with the lower highs and lower lows that we see in the last few trading days. Last Tuesday, 16 February, we hit an all-time high at 3950. By Tuesday of this week, 23 February, the market had rolled over and hit an intra-day low of 3805. On Wednesday, MOST of those losses were recovered with an intra-day high of 3930. On Thursday, the market immediately rolled over and wiped out the recovery. The only saving grace was that Thursday’s intra-day low (3814) was higher than Tuesday’s intra-day low (3805). The market started out positive on Friday but quickly rolled over, taking out Tuesday’s intra-day low. I made the decision to reallocate 50% to the G fund at about 10:30AM on Friday morning when the C fund hit an intra-day low of 3790.
Bottom Line: As TSP investors we have a small number of fund choices and some very restrictive rules. Our job is to maximize our accounts within the context of those restrictions. We have to understand the long term, medium and short term perspectives to be able to plan several steps ahead… We also must have a strong awareness of our individual circumstances and risk tolerance.
Based on the short term and intra-day charts I am very comfortable taking 50% of my TSP funds off the table. I am still cautiously bullish based on the bigger perspective charts. We will get into all of that in this weekends Weekly Update Show and Newsletter. It’s going to be a big weekend!
Next week will be extremely important! Monday is the first trading day of the month. If the 50DMA holds, I would look to get back to 100% stock funds above the 10DMA. If the 50DMA does not hold, 100% G fund is a possibility… Stay tuned!
I have a question and will try not to ramble. I am trying to buy into the Elliott Wave, but I just don’t see where it has helped me from what I have experienced. I followed Scott Zane on a swing trade prior to the collapse last March. Lost a bundle. You predicted the drop, but I was not a paying member at the time. Very impressive. But, it took forever for you to get back into stocks, which missed a large part of the climb out of the hole. You did get the climb after that. I try to follow what you are doing, but not all the time. However, this month I moved with you to 50C/50S on 2/4. I had $972k. On 2/13 I had just over $1M. I moved with you 2/25. I now have $962k. Loss of $10k. I am retiring 3/31 and I am beginning to doubt the EW theory. Deb Crown, although I have no idea what her method is, says she has 33% over the last year. I believe she just has that luck for money. She is 80S/20C. Scott Zane has to be in negative territory. I see the pitfalls of buy and hold as I was 60C/40G for a majority of my contributions. No offense intended in my statements here, just trying to figure out how to protect my money. I don’t expect high earnings every year, but I have projected a hopeful 4% earning when using the TSP calculator. Thanks.
Alex, those are all excellent observations! There are lots of different methodologies that can be applied to managing TSP. They ALL work sometimes and NONE work all of the time… Elliott Wave is one of the tools in the tool box. It forms the structure of the price advance/decline pattern. EW does not work well as a “timing” tool. For that, I would use moving averages and trendline analysis. We will be discussing all of this in the Weekly Update Show on Sunday night. I hope you watch!
My best advice is to pick a methodology that makes sense to you. Get very good at applying that methodology, and stick with it. Good luck!
rgr that. Thanks Jerry. I do not usually get to watch the show live due to other commitments, but I do watch the recording later in the week. I have learned a lot watching the show and really enjoy it. I do like the idea of the EWT, but I need more experience seeing the patterns. I have been watching the moving averages and trying to get a better understanding of that as well. My fault for not learning all of this years ago. When I started as a govt civ, it was October 85. When the TSP started later on, the G was pulling 8%. No one knew about investing and all the HR people were CSRS, so they did not care. However, I do note that Deb Crown is CSRS. I think some of these other sites are in for a rude awakening when wave #5 ends and comes crashing down. Thank you for the response and best of luck to you as well.
Hi Jerry, always love your weekly shows and your analytical guidance. Isn’t it true that we actually have unlimited interfund transfers that are allowed a month as long as the money is being moved to the G Fund after our 2nd move. For example, we could move 50/50 C and S for 1st move then a week later move 100% C as 2nd move. Then in 3rd week move 50% to G and keep 50 in C. Then 4th week of month move the the last 50% of C to to G fund meaning all 100% would be in G. Of course this is just example but this gave us 4 interfund transfers in one month. Shouldn’t (and you may have already done this) this be clarified. Again, thank you for everything!!!
Robert, yes all to that is correct. You get 2 inter-fund transfers per calendar month. After that, you could still move money every day but ONLY increasing the % to the G fund.
Today is my 1st day here.
Terminology question: does DMA10, 50 stand for Daily movement Average 10, 50 points?
Welcome Tatyana! Yes to both questions 🙂
Hi Jerry, this is my second allocation already in March… should I go ahead?
That’s not a recommendation that I can give you. IF you make your second move on Monday, you will not be able to get back into the stock funds until 1 April. Using both of your moves within the first week of a month drastically reduces you options until the next month. You’ll have to weigh the options and pick the one that fits for your risk tolerance. You want to be able to sleep well at night 🙂