Mid-week Update: 27 October 2020
The C fund has closed below the 50DMA for the past 2 consecutive days. Why have we not seen an Alert??
I know that’s a question on the minds of many, and it’s a fair question. This post will explain where I stand, based on my read of the charts with applied technical analysis, AND MY PERSONAL RISK TOLERANCE. We’re going to take a look at 2 charts. First the S&P500 (C fund) and then the NASDAQ (Tech Index).
Monday was a tough day but it could have been much worse… Although the C fund closed Monday below its 50DMA, if the price had closed at the intra-day low of about 3365, an Alert would have posted. Fortunately we saw a huge reversal in the last hour of trading, and the C fund recovered almost half of its daily losses, to close just below the 50DMA. This bullish reversal is what kept us from posting an Alert yesterday. Today the market gave us an “inside day” meaning that today’s trading range was inside of yesterday’s trading range. This is an indication of support at that price level. Given that price is just fractionally below its 50DMA, I’m ok with giving it another day to see if we do get support and move higher.
The Nasdaq Composite Index, while not part of the TSP, tends to drive the overall market. The 3 month daily chart of the Nasdaq below is similar to the C fund above BUT, the Nasdaq reversed yesterday to close above its 50DMA. Today the Nasdaq moved higher and validated support at the 50DMA. The Nasdaq also had an Inside Day today and did not move out of the observable short term down trend. So, while it looks like the Nasdaq is being supported at its 50DMA, we need a break to the upside to confirm it.
Bottom Line: The market closed mixed today. While the S&P500 was down 0.30, the Nasdaq was up 0.64. Volume was lower on both indexes which indicates that both buying and selling were subdued. There is still a fight going on between the Bulls and the Bears… While there is a lot of math, pattern recognition and technical analysis (science) that support our reallocation decisions, there is also the look and feel of the charts, taking into account the 2 trade per month rule, personal risk tolerance, etc.. (art) of coming to decisions. The market has not made a decisive move to the downside. Unless and until we see that, I’m ok with the current allocation of 50%G, 25%C, 25%S.
We’ll see what happens tomorrow. Stay tuned!
Jerry
So I’m a little confused, your recommend a Distribution Percentage: 100% G Fund, but your Oct 27 update says stay at 50/25/25. What amount do you recommend as an interfund transfer and what amount for fund allocation?
Great question! The Mid-Week Update posted last night and explained why we did not post an Alert on Monday or Tuesday. Everything changed this morning when the market opened down 2%. Please read the Mid-Week Update for context, then read the final Alert that will post by the end of the day.