Market Update: 23 February 2021
It was a wild day for the TSP stock funds! These are the days when understanding the big picture really matters…. As we explained in the Weekly Update Show on Sunday, the market is in the 5th and final leg of the rally that began back in 2009. 5th legs tend to be extremely volatile and today was a great example of that! I know lots of you were expecting an Alert this morning. I’m going to lay out my thoughts as the day progressed, why I decided NOT to reallocate to the G fund, and what we are looking for going forward.
An Agonizing Morning
Monday closed with the C and S funds just slightly below their respective 10DMA lines and the I fund just above its 10DMA line. If you were extremely risk averse, this would have been a reasonable sign to move to the safety of the G fund. Since any move after the close on Monday would give us Tuesday’s closing price, I decided to wait and see what the market did this morning before making a final reallocation decision. The futures were down sharply and the C and S funds both gapped down at the open. As I watched, my stomach dropped to see price plummet before finding support at the 50DMA. By 10:15AM I had made the decision NOT to reallocate to the G fund based on the chart below.
The C fund has been rolling over for several days on relatively low volume. This morning the C fund gapped down, hit the 50DMA and began an immediate reversal. When I combined these two facts with my current Elliott Wave count and bullish bias, I decided to maintain my position in the C and S funds. Additionally, I only have 1 reallocation remaining for February. If I used that reallocation today, I would lock in losses and miss any potential gains for the remainder of the month. The decision process was agonizing but, the day worked out in my favor…
With a little help from a statement made by the Chairman of the Federal Reserve this afternoon, the market continued its reversal throughout the day and the C fund actually finished positive for the day. What we are left with is a huge positive reversal day, with bigger volume than the previous day, and a close just below the 10DMA.
We are not out of the woods yet! We need the C fund to get back above its 10DMA but, today’s shakeout should clear the way for price to continue higher. As you can see in the chart below, we are still well within the channel of how we expect this 5th leg to play out.
With today’s reversal following support at the 50DMA our current up-trend remains intact. We still have higher highs and higher lows but, any further downward pressure could set us up for a significant topping pattern. If this happens we will see it in the chart over the next several days.
In the big picture, we are approaching a SIGNIFICANT long term top. This will be the top of the rally that began at the low in 2009! My reading of the chart is that the top in not YET in place. Having said that, there is nothing wrong with taking some money off the table if you are risk averse or do not like the volatility.
Have a great week!
Jerry
Plus the new stimulus may pass prior to end of month, fingers crossed.
Thanks for the update and reasoning.
Thanks for the update! I have a question on contributions, I believe mine gets contributed the 1st of the month? I have it set for 100% contribution to S. So with the S fund being lower, would that just mean on March 1st I’d be buying shares at a lower price anyways? We can’t pick and choose which day we want to contribute right?
Brady, you’re correct. Whatever day shares are bought, you will get that day’s closing price. We have no control over which days shares are bought.
Thank you for the explanation. Lots of fb posts wondering if you had left the planet. Lol
Ha! We definitely have not left the planet! It takes a lot of work to put out these updates/alerts. That’s after the market gives us enough info to make a decision…
Kinda scary! I’ve only got a year until retirement. 80%s and 20%c. This last week hurts!
This week definitely hurt but, it’s short money. You have to think of it from a longer time frame. If you are 80S/20C, need to use that money immediately in retirement in 1 year, and don’t like the volatility, there is nothing wrong with protecting some of it in the G fund.
Nice update, helped to smooth the hair on the back of my neck lol. Was expecting an alert around 11:45 but went back to the weekend show and kept hearing the charts say where not there yet
Great explanation. Thank you
Thank you. I’m so new to it all and don’t have a lot in tsp to start with. I sure hope I don’t lose too much. But am grateful for your knowledge.
Thanks Diane! You’ve joined at a very interesting time for the market… You’re right! You don’t want to lose money in the beginning since that’s when you account grows the slowest. Rule #1 is Don’t Lose Money! Rule #2 is You Have to be IN the stock funds when the trend is up or your account won’t grow. It’s a balancing act..
Thank you Jerry. I always wonder how your feeling during these crazy ride days. Same as me I think, lol.
Really appreciated this yesterday…today have me reeling on the losses. I sure hope Friday bounces up like last week.
It has been one heck of a ride this week! Lots to take in this weekend with the Alert, Weekly Update Show and Newsletter.
Surprised there are no comments. Def some of mine have not made the cut. With bond yields rising and stocks responding in kind this is a definite break to the low side but different than last year. With the $1.9 Trillion stimulus package we should skyrocket from here. If the stimulus package was taken out of the picture and all other things equal would you stay in stocks based off the charts?
David, we’re had quite a few comments on this post but I haven’t seen any from you before this one.. Based on the long term chart, I’m still cautiously bullish. Based on the short term charts, my circumstances and risk tolerance, I’m taking some money off the table.
Thanks. Was basing on past rejected comments. Keep up the great work! BZ!
Thanks David!
Been following you for months and truly liked what I see. Not sure what information or alerts new members get so kindly ensure I get them so I can follow.
Thanks a lot.
Welcome aboard Ned! You should have got a text and email this morning with a link to the Member Dashboard for the new Allocations. Let us know if you didn’t receive them.