* Alert * : 27 January 2021
It was an ugly day for the TSP stock funds. By the close, if you were evenly distributed between the 3 TSP stock funds, your account will be lower by 2.49%. That’s a big hit to take and many people believe it’s a bad idea to sell on a down day. Here’s the thing. Momentum almost certainly changed today. We haven’t seen a 2%+ move to the downside on the C fund since the top in September 2020. Add to that, support at the 10DMA failed on all 3 funds and the technical indicators have turned decidedly negative. Finally there’s Volume… The first chart below puts some perspective to just how many shares traded hands today as the market was tanking. This kind of HUGE negative volume on the Nasdaq Composite Index doesn’t happen because individuals are selling. This happens when large money managers, hedge funds, pension funds… sell. This is not a one day event. Did we just lock in a 2.49% loss? Yes we did. But, we also locked in months worth of very nice gains!
The Nasdaq Composite Index is the U.S. broad technology index. It has been on an absolute tear since the March lows. Volume is the number of shares that change hands. On a day when the price is down, the volume color is red. When the price is up, the volume color is black. Look at the red volume days when the market crashed in Feb/Mar. Today’s volume was DOUBLE the worst days of the Feb/Mar crash! LOTS of shares traded today…
On the C fund chart, you can see that we haven’t seen anything like this daily price decline since the September high. That was the beginning of a 2 month A-B-C correction to the November low.
The S fund gapped down at the open, attempted a reversal, then closed almost at the bottom of the day’s trading range. We will likely see the S fund at its 50DMA before getting back above its 10DMA.
The I fund had a similar gap down as the S fund with the added problem of closing below its lower near term support at 74. The best hope is that the I fund finds support at its 50DMA.
Bottom Line: I would be surprised if this was a single day event. There was too much downside volume for the markets to turn up on a dime. Having said that, stranger things have happened. I intend to sit on the sidelines in the G fund and look for support at the 50DMA. If the C fund does not find support at its 50DMA then we have a much bigger problem. We will discuss in depth during this weekend’s Weekly Update Show!
Jerry
Jerry, I appreciate the helpful insight. I will be looking forward to the Weekly update show.
Thanks Donna!
Please explain why we abandoned your last update that said the charts looked good for upward trend. We got out hastily after a big hit and missed the bounce.
Disregard, I just saw the last paragraph of the alert, bottom line. Agreed, probably best to wait out the volatility. Thanks.
Hedge funds are selling to cover their interest payments on their GME shorts. Stocks will get cheaper as they continue to sell. Thoughts?
My opinion is that GME rise and fall is interesting on many fronts but, has nothing to do with pressure on the over all market.
Jerry
Do you think the massive buying and selling of the Reddit stocks can be skewing the charts?
No, GME is not part of the S&P500 (C fund) so would not effect the charts we follow. We will talk about GME and its effect on the market going forward in the Weekly Update Show this weekend!
I am so new to this. So you are recommending go to G fund inter fund transfer
Welcome aboard Diane! I moved to the G fund in my personal account and I share that with subscribers to the site. That move works for my personal circumstances and risk tolerance. It is not a personal recommendation to you! Only you know your circumstances and risk tolerance.
If you want to get in sync with the allocation then yes, you would reallocate to 100% G fund.
Makes sense?
I am still not sold on chasing the market. Have locked in some significant loses rather than ride the storm and still be in when the storm clears. Most would say it’s not necessarily a great idea to day trade with your retirement. Have you tracked over a long period of time (say a year) to see if you are able to out perform the market rather than just riding it? I do appreciate your information and have been with you a while. But this is peoples retirement. Thank you
Hi Eric,
My PIP for 2020 was approximately 26%. Followers of our allocations got out of the stock funds in late February, 2 days before the beginning of the 34% loss from CoVid. That means we got a 26% return with very low risk throughout the year relative to the 3 stock funds. The methodology works over time but, it’s not for everyone. There are many ways to manage your TSP. You need to find a methodology that works for you.
What a week so far! How we looking?
Hopefully you saw the Alert this morning. We’re back in the stock funds! The full written Alert will be posted in about an hour.