The President ultimately signed the CoVid relief and Government spending bill on Sunday night. This action made the futures market pop on Monday morning, resulting in a gap up at the open of regular trading. It looks like the Santa Clause Rally is in full swing…
My concern on Friday was with the possible Head & Shoulders pattern that was evolving. This possibility was eliminated when the C fund opened above 3715 this morning and proceeded higher. In the short term we can see that the C fund is attempting to break out of the sideways consolidation it has been in since the beginning of December.
From a wider perspective, the C fund has clearly found support at its 10DMA and short term trend line. As long as price stays above these 2 support levels, we are in good shape. This SHOULD be the case, at least through the beginning of January. The C fund is the most stable of the 3 TSP stock funds so, I chose to allocate 50% to the C fund.
The I fund chart is similar to the C fund. While the most recent consolidation on the I fund is different, the result is the same. The I fund has found support at its 10DMA, gapped up this morning, and its indicators look to be turning higher. The I fund is more volatile than the C fund so, I chose to minimize my overall volatility by only allocating 20% to the I fund.
The S fund has had an amazing run since the low back in late October. At this point, the S fund is too over extended in price relative to the C and I funds, and relative to its own 50DMA. There needs to be a pull-back or consolidations, allowing the 50DMA to catch up to price, before I would reallocate to the S fund.
Bottom Line: I am tentatively optimistic that prices will move higher over the coming months. A huge weight of uncertainty was lifted when the President signed the bill this weekend. This also paves the way for congress to increase CoVid relief payments early in the next administration. This, along with recent statement from the Federal Reserve implying a loose monetary policy for the foreseeable future, should keep enough money sloshing around for stock prices to move higher.
As always, technical analysis is as much art as science. I am making this reallocation based on MY personal circumstances and risk tolerance. Feel free to follow along with my allocation and/or use this analysis to make your own reallocation decisions. This is NOT a recommendation for what you should do with your personal TSP account. You need to make that decision based on YOUR circumstances and personal risk tolerance.
Let’s enjoy this Santa Clause Rally and Happy New Year!!