Weekly Update Newsletter: 07 February 2021

Wow! What an explosive week! The S&P500 (C Fund) found support at its 50 Day Moving Average (DMA) last Friday and exploded higher this week. For the week the C fund was up 4.65%, S fund up 7.48%, I fund up 3.20% and F fund down 0.35%. The C and S funds are back to new all-time highs and the I fund is closing in on its prior high. We saw HUGE gains this week but, it’s important to remember that these gains followed last weeks correction…

This week were looking at 3 areas. First we’ll take a final look at GameStop (GME) and its 10 day round trip from $50 to almost $500 and back to $50. Next we’ll look at how you can be both Bullish AND Bearish at the same time. Finally we’ll breakdown the 6 month daily charts.

GameStop (GME)

The GameStop saga is likely behind us but it goes to show that fear and greed are, and always will be, alive and well. IF you see it happening early and can execute, you can take advantage of the trend AND know when to bail! On January 25th, GME had already seen a nice move higher to $50. 3 days later, the intra-day high was almost $500. This happened in a pretty clear Elliott Wave 5 step pattern. If I were watching this stock on a minute to minute basis, I would have bought at $300 and sold at $425. This is NOT investing! This is DAY TRADING at its BEST! Day traders make money when price moves. It doesn’t really matter which direction price goes, but the bigger the move (volatility) the more money is made/lost…. Now let’s move on to TSP.

Bullish AND Bearish

How can you be both Bullish (expecting the market to go higher) and Bearish (expecting the market to go lower) at the same time?? It depends on the time horizon, and you need to be able to see both…

Bearish

From the Bearish perspective, just look at the chart below. From 2009 thru mid-2019, the C fund increased in price on about a 30 degree angle. This is a pretty aggressive up angle but, obviously sustainable for a long time. The rate of increase since the March 2020 low, on the other hand, is NOT sustainable. There WILL be a correction. The timing of when the correction will begin is IMPOSSIBLE to anticipate exactly. The important thing for TSP investors is to see that a correction is coming from a big picture perspective AND drill down to the present.

Bullish

In the big scheme of things, we will see a serious correction at some point in the relatively near future. On a closer in basis, we are DEFINITELY still in a Bull market. The Elliott Wave count since the March 2020 low is still in play, even after the short correction last week. The C fund is at new all-time highs with the last significant correction being Sep – Nov 2020. IF this count plays out, price will move much higher from here…

6 Month Daily Charts

The charts below show the past 6 months of all 3 TSP stock funds. The C and I funds hit their respective 50DMA lines and blasted higher. The S fund never got down to its 50DMA. The objective is to manage risk! Rule #1 is Don’t Lose Money! Rule #2 is You have to be in the stock funds to make your account grow. These 2 rules are often in conflict! That’s that way it is!

Bottom Line: We had a very short correction and the market is now moving higher. Be in the stock funds when the market is moving up BUT, remember the long term chart…

Have a great week!

Jerry