TSP Talk - Thrift Savings Plan Strategies

We bought. Is it time for a rate cut?

Stocks bounced around again on Thursday as the Dow flip flopped above and below the break- even mark all day. The day ended slightly in the red but again the internal market did worse than the larger indices might indicate. That's not great news for those of us in them market - which amazingly, I am now. It's been awhile. How could we buy at this level?

Believe me I hate buying here. This is a case of trusting Trader Fred's TSP Trader System, which gave a buy signal. It did the same thing in early April, I ignored it, and we saw a nice rally in stocks. But we are also getting confirmation from both the AAII survey (38% bulls, 37% bears) and the TSP Talk sentiment survey (46% bulls, 37% bears), and the McClellan Oscillator is actually oversold here.

I asked Trader Fred if he could give us more information about the submodel W buy signal. Here's what he had to say:

1) Historically, there were six Submodel W trades in the back testing from mid-July, 2004 to April 2007.

2) Those Submodel W trade lasted for about four to nine months. The total time in the market went from a month to a year.

3) The average gain during the back testing for a Submodel W trade was 6.5%.

4) The gains and losses went from +11.0% to -2.5%.

5) 4 of the 6 Submodel W trades during the back testing did not have a daily loss during the time the trade was in the market.

6) 2 of the 6 trades did experience one or more days when they lost money during the back testing.

7) 2% of the days the Submodel W trade was in the market there was at least one day that had a loss of between -0.1% and -1.0%.

8) 3% of the days the Submodel W trade was in the market there was at least one day that had a loss of between -1.0% and -3.5%.

9) Based on the back testing, the stop for a Submodel W trade is if on any one day the percent loss is greater than or equal to -1.0%, the trade is exited the next morning.

-- Trader Fred

Of course past performance is no guarantee of future results. Read more from Trader Fred on the TSP Trader System page.

Here's what I want to see: The S&P 500 is just 2.7% away from the all-time high of 1552.87. The index could just head south now or, what is typical action is that the S&P could make the new high, take out some stops sending it just above the breakout level, then pull back. That would give us a 3% gain or more if we sold. I am not sure how much patience I will have on the downside. The S&P must stay above 1500 in my opinion, or all bets are off. there is a pullback in our future. The question is always when - both time-wise and from what level will it start?