Sunday Update: 01 Jan 2017

Current Allocations: 50% C Fund, 50% G Fund. 

Happy New Year everyone!  2016 has been one heck of a ride, from Wall Street to the White House…  If you’re reading the financial section of the papers this weekend, you’ll see all kinds of articles about how no one could have predicted the roller coaster ride the stock market has taken in 2016.  Wall Street lore says “As goes January, so goes the year”.  Well, not so this year!  2016 was a great lesson in risk mitigation and the perils of attempting to forecast.  Go back and read the 10 January post to jog your memory of the level of doom and gloom that existed by the end of the first week of January 2016, how we mitigated that risk, and set up for gains throughout the year.

We are entering 2017 50% C fund and 50% G fund.  As you can see from the short term chart below, it appears that the top is in (at least for the time being).  We are up so far above the moving averages that I don’t want to be fully exposed as the market drifts back down to a support level.  In the long run, the up trend is still firmly in place.  We’ll see what January 2017 has in store for the long term trend, and respond accordingly…

Short Term

We reduced our exposure to stocks by 1/2 pretty much as close to the top as possible last week.  We will watch the short term chart for indications to either get back fully into the stock funds OR to move completely to the G fund if long term support levels get broken.  For now, I’m closely watching the 2150 – 2200 level on the S&P500.  Best case scenario is we get support at 2200 and a big break up.  We’ll watch and see…

Long Term

The long term case has us going down to around the 2150 level by late January or early February.  This would likely be the intersection of the 50 Week Moving Average and the 61.8% retracement level from the short term chart above.  This is where I’d be looking very closely to getting back to 100% stocks…

The S fund has a similar chart pattern to the C fund but is not extended as far beyond the last major top from 2015.  The 1115-1130 level should provide some support for the S fund by February.

The I fund has been the lagger in 2016 but is the most promising of the chart patterns.  If the I fund pops above 59 I will get back into it.  Most likely, however, the I fund continues down to 54-55 before it’s next run up.

We’re entering a whole new world in 2017!  The markets are restructuring around BREXIT in the UK, Trump in the US, and a world wide nationalist movement.  I fully expect 2017 to be a positive year for the TSP funds but, in the very long term, we are on borrowed time…  We will likely see a major correction within the first 4 years of the Trump administration so, buckle up!  Now is definitely NOT the time to “set it and forget it” with respect to TSP!

Have a great week

Jerry