Sunday Update: 15 January 2017 *ALERT*

* ALERT * New Allocation: 50% G Fund, 30% I Fund, 20% C Fund

It was a pretty flat week for the U.S stock funds (C and S).  The I fund was a different story and we’ll get to that in a minute,  The S&P500 (C Fund) has still not closed above the 2280 line and is looking very toppy.  As you can see from the 2 yr charts of the C and S funds below, now is not the time to add to those positions.  In both funds, the price chart is at or near the upper trend line and the indicators are beginning to roll.  In terms of risk/reward, the C and S funds are not a great bet.  Since both the C and S funds have very similar charts, and have been moving together for several months, I am going to keep 20% in the C fund just in case the U.S. market does break out again.  Let’s take a look at the C and S funds before getting into the I fund.

Short Term

The short term C fund chart continued the consolidation this week between 2260 and 2280.  A strong breakout with a close above 2280 could change things but, the odds are against it.

Long Term

The C fund could continue to move upward for a few weeks before really butting up against the upper channel line.  The price chart, combined with the over bought levels of the MACD and flattening divergence, looks like a roll over is imminent.  This is a weekly chart however, so we could see a few more weeks of minor gains before a significant correction.

The S fund chart below is very similar to the C fund chart above.  The price chart is still consolidating along the upper channel line, with the MACD over bought and the divergence declining.  The S could continue up a bit from here but the odds are against it.

A Resurgence of the I Fund

The I fund has seriously lagged the C and S funds since the last major low in early 2009.

The I fund is the only TSP stock fund that has not made a new high since the top in 2007!  As a result, there have been quite a few articles written about the I fund, advising that it should no longer be included in a TSP investor’s portfolio.  The charts however, tell us a different story.  The 15 year monthly chart below shows that the price just broke up from the lower channel line with Stochastic and Divergence indicators turning positive.  We will likely see some resistance at the 65 level since this level has been hit 3 times since 2007 but, the projected top should be in the 70 range.  A close below the lower channel line invalidates this projection.  The risk/reward of this chart is significantly better than either the C or S fund charts at this point!

The 2 year weekly chart below corroborates the longer term chart above.  The price breakout is more visible and the indicators are positive and moving higher.  My line in the sand would likely be a weekly close just below 57.  If the current price is 60 and the projected high is 70, then 57 represents a 5% risk for a potential 16+% gain!  A run up just to the prior high at 65 would be almost a 10% gain from this point.

There is still a significant level of risk in the market.  I’m not ready to jump fully into the stock funds at this point but, the I fund chart is too good to pass up.  Taking all of this into consideration, my new allocation will be 50% G Fund, 30% I Fund and 20% C Fund.

Please post questions to comments and have a great week!

Jerry