Current Allocation: 100% G Fund

The latest ALERT went out Thursday night.  Anyone who reallocated to 100% G Fund on Friday got out as close to the top of this rally as possible.  In the short run, we are watching a couple of things.  We should see the 50DMA line start to bend down.  This will happen as the price generally stays below the 50DMA.  Since I don’t expect this to be a very long consolidation, we shouldn’t see the 50DMA line to cross the 200DMA line.  That will happen when the big correction comes in early 2018…  As the price chart comes down, the RSI indicator should move into Over Sold territory (below 30) and then turn up as the price chart hits the 200DMA line.  This will be our indication to get back into the TSP stock funds!  This could take several weeks to months and it is NOT guaranteed!  IF the market reverses and closes above 2490 then we will have to reevaluate…  Take a look at the short term chart below for what this looks like.

Short Term

We had 2 big down days in the past 2 weeks, finished this week lower than last week’s low, AND below the 50DMA.  There is little doubt that the consolidation has begun.  The price chart is likely to get pretty volatile over the next several weeks as we head lower to the 200DMA.  As long as we don’t see a daily close above 2490, we’re in good shape.  We should start to see the 50DMA line bend down over the next few weeks, the RSI continue into Over Sold territory, and selling volume increase.

Long Term

The weekly chart below shows the beginnings of the consolidation from a different perspective.  This week we broke down below the 4 month up trend line.  This break indicates the beginning of the consolidation.  It does not indicate a change in the overall trend but, a trend line break is significant.  Another important take away from this chart is the volume.  We saw relatively low volume selling over the past 2 weeks.  This is a good indicator that more selling is still to come…  The bottom will come when everyone “throws in the towel”.  What does that look like?  Take a look at the volume in January/February 2016.  When we see that kind of volume it will be time to get back into the TSP stock funds!

The S Fund is leading the C fund a bit.  It has had 4 consecutive down weeks and its RSI indicator is lower than the C fund.  We will watch the S fund closely since it is likely to turn up before the C fund.  This will give us an early indication to get back into the TSP stock funds.

The I fund has the potential to drop more significantly than the C and S fund during this consolidation.  The I fund has had the strongest run since the election in November 2016 and also tends to be the most volatile fund.  If the I fund drops to a weekly close below 64 then It could fall into the 61-62 area and “fill the gap”.  This would be a great set up for huge gains going forward into 2018!  We’ll be watching the I fund very closely.  

Depending on how this consolidation plays out, I may not evenly distribute between the 3 stock funds when the market turns back up.  We’ll see what the charts have to say at that time but, I could see leaning more heavily on the S and I funds…

Please post question to comments and have a great week!