Sunday Update: 24 December 2017

Merry Christmas and Happy Holidays Everyone!  

As I explained in the Newsletter (which you hopefully read before linking to this post) we have reviewed your feedback and are making improvements to GrowMyThriftSavingsPlan.com.  My goal for this site is to provide the best technical analysis possible to help you make decisions that maximize your TSP account.  A big part of that is presenting in a very straight forward and easily understood format.  To that end, we’re tweaking the Sunday Update to show clear Buy/Sell Zones in the charts.  You can decide when to buy/sell (i.e. reallocate) within the zone, based on you appetite for risk…  The charts/layout below is an example of what the first Sunday Update of each month will look like in 2018.  Any and all feedback is greatly appreciated!

Very Long Term

The S&P500 (C fund) chart below is a little busy but I think you’ll get the idea.  When we stack the MACD/Stochastic and RSI indicators below the price chart, we can construct Buy/Sell Zones.  The Yellow line represents the first indication of an upcoming trend change.  The Green (Buy) or Red (Sell) line represents the last best time to reallocate within the zone to maximize your TSP account.  When we look backwards over the last 12 years, there have been 4 clearly identifiable zones where reallocation between the funds makes sense, taking into account the 2 IFT per month rule.  Reallocating within these zones would minimize downside risk while maximizing TSP returns over time.  

The 12 year chart below is great for getting a big picture view but, let’s take a look at the 5 year monthly chart for each of the 3 TSP stock funds to drill down to when the zones would have emerged.

Long Term

Below are all 5 year charts where each candlestick represents 1 calendar month of price movement.  We are moving to 5 year monthly charts to best accommodate the 2 IFT per month rule.

The C fund chart shows one sell zone and one buy zone.  In January 2015, the C fund price closed down on big volume.  In addition, the MACD, Stochastic, and RSI all crossed to the downside.  This was the first serious indication of a long term trend change.  By the end of July 2015, the price chart had broken down badly in big volume. MACD, Stochastic, and RSI all turned decidedly negative.  This was the last best time to get out of the TSP stock funds and into the safety of the G fund.  This Sell Zone was 6 months long.  A lot happened on the weekly charts during those 6 months that predicted the monthly breakdown in July 2015.  Intra-zone technical analysis will be provided to site members, along with Alerts of when I make relocations in my personal TSP account.  Click here to sign up!

The Buy Zone began at the July 2016 breakout.  The price chart broke out big time following a huge reversal pattern in June.  MACD/Stochastic were very close to crossing positive and the RSI had been trending up since January 2016.  The end of the Buy Zone was January 2017 when the Stochastic moved significantly positive.  That was the last best chance to get on the current rally ON A MONTHLY BASIS.  This Buy Zone was 5 months long.

The S fund chart below is a good example of how this method of analysis is still an art and not an exact science…  The Sell Zone began in May 2014 and ended in October 2015 but the price chart continued to rise?!  While the price chart continued higher, the technical indicators clearly anticipated a fall in prices which is what we saw beginning in July 2015.  Then we saw a head fake in October following the end of the Buy Zone in September 2016.  Again, the technical indicators indicated that further decline was unlikely which was reflected in the November 2016 follow thru.

The I fund has been a bit more volatile than the C and S funds over the past 5 years but the returns were huge once the correction was completed.  The follow thru in January 2017 set the I fund off to the races for the rest of the year!  Again, this is on a MONTHLY BASIS.  

Summary

The 2 IFTs Per Month rule is forcing us to use a monthly time frame to make TSP allocation decisions.  This has pros and cons.  The TSP is designed to be a LONG TERM retirement investment vehicle.  That being the case, it makes sense to use longer time frame charts.  Monthly charts also clear out the forest for the trees and provide a great visual.  The downside is watching the day to day movement of the market but not making decisions until the beginning of each month.  

I think the Buy/Sell Zones are a great way to present the data and accommodate peoples individual risk tolerance.  Please let us know how you like the new format!  Post questions to comments and look out for the final date/time of the January Webinar.

2018 is going to be a big year!  

Jerry