TSP Talk - Thrift Savings Plan Strategies

A strong market will stop the bleeding.

If the market is still in good shape it will put a Band Aid on Monday's damage and either consolidate or bounce back. If it can't stop the bleeding the intermediate term will be inflicted with more pain.

The shortest term indicators are oversold which would mean a bounce back for stocks if all is still well. But as I have been saying for some time now, the intermediate term indicators are telling us the market needs a rest before a strong rally can begin again.

As always you have to take your investment time frame into consideration, as well as your tolerance for pain, and your investment strategies and goals. Since we are all all different there is no one correct answer.

The chart below shows us that the S&P 500 is still well within its most bullish uptrend channel. No real damage has been done yet. If the market is going to pullback, I marked the five possible areas of support it will encounter. If the first doesn't hold, watch for the second, etc.

Chart provided courtesy of www.decisionpoint.com

The I fund has been doing well the past few weeks following along with the C and S funds, but it has not made a new high like the other two. The only reason it has not made a new high is because the dollar has been rallying since early September. For new readers out there, the I fund is greatly affected inversely by the dollar. When the dollar moves higher, it has a negative impact on the I fund, and as the dollar falls it helps the I fund.

The dollar seems to be trying to form a top lately but we saw similar action in October only to see the it move higher as it hit support (green line) toward the end of that month. Here it is again sitting on support (red dashed line). This support looks pretty solid as it is the point of a double top breakout. But if this support does not hold and it moves down to 90, the I fund should benefit for a few weeks.

Chart provided courtesy of www.decisionpoint.com

That wouldn't necessarily mean the I fund will go up. It just means it will outperform the international stock markets. If the international markets go up, the I fund will do better. If the international markets go down, the I fund won't go down as much. The opposite is true when the dollar rises.

As I said, the support looks strong but that PMO indicator at the bottom of the chart, is giving a sell signal, so we'll have to see what happens.

Bonds rallied again Monday making it tempting to join the ride. It stopped at the 50 day moving average Monday (see the bond chart we talked about yesterday at the bottom of the page). The PMO on that chart is in the buy zone.

So, a one day drop in stocks does not a pullback make so I won't make any predictions for today. If the market is going to gain strength for another big move higher it needs to continue to rest a while longer. Otherwise it will be rising on fumes and support will get weaker and weaker.

That's all for today. Currently 100% G fund. Thanks for reading. See you tomorrow.