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.

Daily Perspective

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…

Intra-Day Perspective

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!

Jerry