|
|
Fund share prices as of: 11/30/07
|
Today's Comments (Short Term Outlook)
Printer friendly |
|
Signs of a change - and limitation ideas Stocks rallied again on Friday as the bulls continue to try to make their case for a sustained move higher. The bears would argue that this is just a short-term rebound, and that we are going to see a resumption of selling before long. I agree... with both of them. I do believe we could see some selling toward the middle of the month, perhaps beginning next week as we have a FOMC meeting on tap for next Tuesday (next week). Or, perhaps we will see some selling this week and a Fed rate cut will ignite another move higher? Whichever happens in the short-term, I do believe the market will rally in the coming months. There is a small gap in the chart of the S&P 500 at about 1430, and that could be a target for any test of the recent lows, but looking at the PMO, which is a momentum indicator, we are getting a buy signal as it moves above its 10-day EMA (exponential moving average). The 20-day moving average of the S&P is also turning up. That doesn't mean we will continue straight up, but it could mean that the odds favor buying any weakness.  Chart provided courtesy of www.decisionpoint.com Back on September 21, I wrote a commentary suggesting that something did not seem right. Gold was soaring, oil reached $80 for the first time, bond yields were way down but started moving higher again, and the dollar was dropping like a rock. The market, in fact, did not like what was happening and we saw a 10% correction off of the top soon after. Things are starting to change recently. Oil, which almost hit $100 a couple of weeks ago, seems to have made a double top on the chart after Friday saw a move below $89, and the prior low. There are several areas of support for oil on the chart, but I can see it possibly moving down as low as the mid-$70's.  Chart provided courtesy of www.decisionpoint.com Gold ran straight up from late August until early November, but we are starting to see a possible double top here as well. Rising gold prices is an indication of inflation concerns. A close below 775 will do that. It is about 80 points over its 200-day moving average and that (705) is a possible downside target if we do see a break below 775.  Chart provided courtesy of www.decisionpoint.com The dollar has been in an almost free-fall since August, and of course has been in a multi-year down trend. But we saw a move above the recent steep resistance line and there is a lot of room overhead to move higher. The PMO also gave a double buy signal and I think we could see several weeks of strength in the dollar - regardless if the long-term trend continues downward. That could hinder the return of the I-fund in the near-term.  Chart provided courtesy of www.decisionpoint.com And lastly, the yield of the 10-year T-Note, which has moved back down after the small rally in September, seems to be trying to find a floor and the fact that it has moved down below 4% tells me that the bond market is not too concerned with inflation. This is good news for those looking for a rate cut from the Fed next week.  Chart provided courtesy of www.decisionpoint.com The economy is slowing a bit, but it is still strong and some believe that if the Fed cuts again, it is feeding the credit problem with exactly what caused it - money that is too cheap and easy to get. But there's no doubt that stocks like low rates as it helps the bottom line for corporate America. The TSP Talk Sentiment Survey remains on a buy signal and a 100% S-fund allocation after last week's neutral 1.55 to 1, bulls (51%) to bears (33%) ratio. A quick mention of the Thrift Savings Plan's attempt to limit transactions to two a month: I am sure if we all worked together (participant and the TSP) we can come up with something that seems more fair to us, and less stressful to the program. I just don't know if they are willing to negotiate at this point. Making an enemy of the TSP is not in our best interests as it is a great program that we all benefit from, but our TSP accounts are too important to us to take the changes lying down. I've come up with a few things alternatives that I would be OK with. What do you think? - One buy transfer and one sell in a month (2 transfers) just does not seem adequate. I would say 4 should be enough to be effective. The strong move higher in stocks at the end November shows us why two won't do. If you happened to use up your 2 transfers during the high volatility period earlier in the month, you would not have been able to get in on the gains later in the month. Even Trader Fred, whose system is much less active than most, had to make 5 transfers in November (one of which could have been avoided as it moved from the G fund to F), but he managed a 4% gain in November as opposed to the 4% to 5% loss in the stock funds, because of those trades. - Charge a fee for anything over 2 transfers in a month. The TSP has indicated that it could be expensive to implement a new fee based system. They also said they were afraid some of us would hit the wrong button and accidentally make a transfer. I'm not sure exactly what the second one means, but I'll accept the first. But the TSP is not going anywhere any time soon. They spent $100's of millions to implement the daily record keeping system, surely this would be less expensive and may be worth the one time investment. They could collect transfer fees for many, many years to come. I know the people who don't actively manage their accounts may not want to chip in on the bill, but the L-fund participant should since their accounts are rebalanced daily. And, having the option to move your money on request has to be worth something - even to those who don't make transfers now. I say, get some bids on the project and let's find out what it would cost. - The I-fund fees seem to be the main source of the extra expenses. Why not limit just the I-fund transfers to 2 per month? The fees on the C fund transactions don't seem to be a problem. The S-fund fees are somewhere between the two. Perhaps we could just put a limit on just the S and I fund interfund transfers? - How about 24 interfund transfers per year? I know, that is two per month, but there are some months, like this past October and November, when you need to be more active than during quieter months during the year. If we had a set amount to use during the year, perhaps we would be more careful in picking our spots, but still have the ability to be active when the market dictates such activity. Just some suggestions. I'm sure there are many things that can be considered. I just hope the folks at the TSP are willing to listen to their participants. That's all for today. See you tomorrow. Have questions? Visit our message board for answers.
Would you like to be on our
email alert list?
We will send you an email when there is a change to our asset allocation
or market outlook. Your email address will never be given out.
Read our
privacy policy.
By signing up you agree to the TSP Talk
Terms of
Service. More details below **.
Like what you're reading?
Tell a Friend
about us.
|