TSP Weekly Newsletter: 02 April 2023
The market ripped higher this week! Three consecutive Green weeks for the C fund… For the week the C fund finished up 3.48%, S fund up 4.78%, I fund up 3.92%, and the F fund down 0.52%. This kind of volatility is great for a day trader but can reek havoc on your TSP account.
In this week’s Podcast, we look at the three types of active TSP fund management; Day Trading, Swing Trading, and Trend Trading. It’s a great episode that we highly suggest you watch.
The objective of the Grow Model Portfolio is to be on the right side of the market. We want to be in the stock funds when the market is trending higher and protecting those gains when the market is trending down. That’s the definition of trend trading applied to TSP funds, and is our simplified objective. The reality is that we use a hybrid of swing trading and trend trading to maximize gains and minimize downside risk.
Trend Trading
An up-trend is defined by higher highs and higher lows. Since the low in October 2022, the C fund established an up-trend on 01 February 2023. On that day, price established a higher high over this tradable time period. Using a pure trend trading methodology, that is the day you would have reallocated from the G fund to the stock funds. The downside of a pure trend trading methodology is obvious. You have to accept significant draw downs while waiting for a confirmation of continued higher lows. If price puts in a lower low, you have a very difficult decision to make…
Hybrid Swing/Trend Trading
GrowMyTSP employed a hybrid Swing/Trend Trading methodology since the October lows. The red vertical lines show the days when we reallocated out of the stock funds. The green vertical lines are days we reallocated back into the stock funds. Some of these trades were successful, some were not. If we use the 20DMA line to identify the trend, we want to be in the stock funds when price is above the line, and in the G fund when price is below the line. These moves are supported by RSI, CCI, and MACD.
This hybrid methodology protects us from the big drawdowns of the pure trend trading methodology, but exposes us to more frequent small drawdowns based on price volatility.
Pure Swing Trading
Coming out of the most recent Alert on 29 March, we intend to use a pure swing trading methodology to reallocate out of the stock funds. In the past 3 trading days, the C fund is already significantly extended beyond its 20DMA. We don’t want to give up those gains by waiting for price to cross down below the 20DMA before making a reallocation decision. Right now, all the technical indicators are pointing to price moving higher. The indicators are likely to soften before price rolls over. We expect this to happen at the 4200 or 4300 level. Once the technical indicators begin to soften, we will reallocate out of the stock funds to capture gains since 29 March. We will not be waiting for the technical indicators to confirm a sell signal as we do in the hybrid methodology.
Why the change in methodology here? We believe that the bull rally off of the October low is corrective and will ultimately fail. If price gets above 4300 then our assessment could change. Unless/until that happens, we want to lock in gains and minimize downside risk.
The Weekly Charts
While we are hyper focused on maintaining recent gains, the weekly charts require us to keep an open mind that price could move significantly higher!
The weekly chart of the C fund is extremely strong. We are in an up-trend (higher highs and higher lows) since the October low. The 20WMA is now sloping upward, and as of Friday’s close, we have a buy trigger on a weekly basis. The look of this chart, taking nothing else into consideration, is calling for price to continue higher.
The weekly chart of the S fund is not as strong as the C fund. Price is right on its 20WMA, RSI is just below 50, CCI still below 0, and MACD is still negative (but just barely). IF the C fund continues higher, the S fund will follow along.
The weekly chart of the I fund is text book! We have a strong rally off of the October low and an orderly pull back to the 20WMA and 50 RSI line. This week we had an explosive move higher from support at the 20WMA, supported by all of the technical indicators. The I fund sure looks like it wants to move significantly higher. The weekly buy trigger that we got in early November was clearly confirmed this week!
The F fund is the big question mark! Price has consolidated along its up sloping 20WMA for the past 3 weeks. It’s getting ready to break in one direction of the other. A weekly close above 102 is very bullish. A weekly close below 96 is very bearish.
Bottom Line
This is a very, very tough market. The geopolitical, macroeconomic, military, and social stresses of the current environment, world wide, make it very difficult to believe that we are at the cusp of a new Bull Market in stocks. There is no “reason” for this rally to grow legs and really take off. Having said that, the weekly charts are undeniable!
At GrowMyTSP, we will stay focused on the charts. Price is the only thing that matters! As long as this rally continues, we will remain in the stock funds while watching the technical indicators for a potential turning point.
Have a great week!
The Grow My TSP Team
I like the new Pure Swing methodology and protecting gains!
Thanks Don. It’s going to be an exciting month!
This is a great example of how the grow model is getting better over time.đź‘Ť Certainly it’s tough with only two trades, especially in months that last up to 5 weeks. What are some methods for one to keep track/monitor their change from entry price(s) on a move? That is to have a spreadsheet or other that shows current percent change for the move vs. one’s own risk tolerance when the technical indicators start to wiggle?
100%!
I really enjoyed this because I had been thinking the same way of locking in those gains! In the past it seems we lost some just waiting for confirmation, and I realized my fomo wasn’t’ as strong as watching a decline in my balance. Good walk and talk Jerry. Thank you.
Thanks Sherri!